FX weekly: BoJ intervention, 14 currency pairs levels and targets

USD/JPY 's climb to current 158.00's is the result of interest rates travel from deeply negative to current positive. The JGB yield curve from short rates just achieved the necessary and proper rates last Thursday. The massive readjustment just achieved positive and proper levels after 1 month since the Ueda Man raise. The adjustment resulted in 1000 USD/JPY pips.

Ueda Man raise because no reason existed to touch headline rates especially when central banks contemplate lower rates. But current levels supplies support to Inflation and GDP at 2%.

USD/JPY's overall problem is DXY as DXY rose straight up from 101.00's since January to middle 106.00's. USD/JPY must naturally follow as DXY and USD/JPY correlations run +90% as a permanent market condition.

Consider the September 2022 intervention. USD/JPY at 152.00's matched the DXY top at 114.00's. No reason for Intervention as DXY was dropping and USD/JPY followed.  The BOJ forgot to look at DXY.

DXY today is at a significant top and naturally the BOJ isn't watching. The BOJ dilemma is trade vs the Japanese Consumer and Economy.

USD/JPY at 158.00's now comes to a crossroad. BOJ trade overall is fine although for the first 10 days of April, Imports at 3613, 163 exceed Exports 2852,226 by a deficit of 760, 937. No cause to intervene.

The BOJ is abiding by correct trade rules as noted by the Treasury Semi Annual Report to Congress  on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. Last Japan and BOJ met the manipulation list was 2020 and 2019 but not 2023 nor 2022. The next report is scheduled for May / June 2024.

The BOJ's previous JGP purchases are in massive profits especially when YCC was lifted and the 10 year yield's rise of 20 points.  No reason to intervene.

The Japanese economy as low GDP, high Inflation and a 20 point rise in Oil since February is reason to consider intervention. The Choice is take a light hit on trade and rescue the economy or continue with positive trade and the Japanese consumer suffers further.

Durable goods dropped drastically in 2024 and now trades on a slight upswing from oversold.

Intervention wasn't a smart move in 2022 and not a bright maneuver for 2024 as DXY will take down USD/JPY.

USD/JPY

Next tops are located at 158.90, 159.57, 160.25, 161.62. Overbought remains until at least 153.00's and 152.00's trade.

The USD/JPY and JPY cross pair strategy is short all JPY. JPY cross pairs require at least a 500 to 600 pip drop to achieve a semblance of normal.

Our weekly strategy is short USD/JPY prior to 158.90 to target 156.86. EUR/JPY targets 167.81, GBP/JPY 196.05. GBP/JPY next big line is at 198.80, EUR/JPY at 169.97.

CAD/JPY's next big line at 116.01 and targets 114.53. AUD/JPY targets 101.25, NZD/JPY 92.47.

Weekly

EUR/USD next big break is located at 1.0750 then 1.0873 and 1.1037. The EUR universe is mixed and lacks uniformity as overbought EUR/CHF, EUR/JPY,  EUR/NZD is matched by oversold EUR/AUD, EUR/CAD and EUR/GBP.

GBP/USD trades just below vital 1.2528 then 1.2625,1.2782 and 1.2808 at the 5 year average. Overbought applies to GBP/JPY, GBP/CHF, GBP/NZD and oversold GBP/AUD and GBP/CAD.

The problem anchor pair this week is overbought AUD/USD and AUD cross pairs as AUD/CHF, AUD/JPY, AUD/CAD. Better trades exist.

EUR/CAD, GBP/CAD and NZD/CAD trade oversold. USD/CAD waits on the break at 1.3630  to target middle 1.3500's.

GDP vs inflation

The popular term 1 month ago across all economies was Technical Recession. The term disappeared by a 0.2 and 0.4 rise in GDP. GDP remains oversold and applies to all economies. Below are Inflation Vs GDP spreads.

The Fed now stands at 1.9 and the BOJ at 1.2. Australia at 3.4 is matched by NZD at 3.4 and 3.0 for GBP.