Forex Opinion & Analysis

Japanese Yen Weakens on BoJ Rumor and Strong U.S. Jobs


The Japanese yen has fallen past 132.50 per dollar (from 129.00 last Friday), reaching its lowest point in four weeks following reports that the government is considering Bank of Japan Deputy Governor Masayoshi Amamiya as the next central bank leader.

Amamiya is seen as the most dovish of the potential candidates, putting an end to hopes of the BoJ normalizing its monetary policy after years of ultra-easy measures. However, the Japanese government has since denied the rumors that they had approached Amamiya and maintains that the new BoJ Governor will be announced sometime in February. 

Recently, the Japanese central bank maintained its ultra-low interest rates and yield control policy, despite speculation of a policy change. Current BoJ Governor Haruhiko Kuroda stressed the need for a sustainable 2% inflation target, accompanied by rising wages. 

The USD/JPY was also affected by a strong dollar due to positive US jobs data, indicating that the Federal Reserve has room to raise interest rates.

In January 2023, the US economy created a surprising 517K jobs, the largest increase since July and well above the 2022 monthly average of 401K, easily surpassing the market prediction of 185K.

The job growth was broad-based, with the biggest increases in leisure and hospitality (128K), professional and business services (82K), and health care (58K).

USD/JPY price chart.

Last week, USD/JPY had a noteworthy 4-hourly candle close from a technical viewpoint, breaking through the descending trendline and the psychological 130.00 level.

The new 4-hourly open was in the form of a Hanging Man candlestick, with no upper wick, indicating bearish stagnation or a reversal. If we see some retracement, the 200-day moving average could act as support just below 131.00.

On the weekly view of the chart, upside resistance suggests 132.90, 133.90, and 134.40 could be points of contention for the pair. 


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