USD/JPY Price and Chart Analysis

• The New BoJ governor is going to have his hands full from day one.
• US dollar strength pushes USD/JPY to a fresh six-week high.

Kazuo Ueda, the Japanese government’s nomination to become the next Bank of Japan (BoJ) governor, will inherit a tricky set of problems when he takes over from current incumbent Haruhiko Kuroda on April 8. Japanese y/y inflation hit 4% in December, the highest level since January 1991, while Q4 growth missed expectations of 2% annualized and grew instead by a tepid 0.6%, according to recent data.

Japanese Inflation – 25-Year Chart

The new central bank chief will have to decide when, and by how much, the BoJ needs to start paring back its ultra-loose monetary policy to keep inflation in check, while allowing enough monetary slack to allow the economy to grow. As other countries have found recently, once inflation becomes entrenched it becomes progressively harder to pare back. While it is unlikely that the new BoJ governor will make any announcements on his first day in office, it is likely that news of potential policy tweaks will begin to appear soon after Mr. Ueda begins his five-year role.

USD/JPY has been on the move higher since the middle of January as traders try and factor in any change, or degree, of Japanese monetary policy against a US dollar that has found a fresh lease of life after the recent strong US Jobs Report (NFP). USD/JPY is back at levels last seen on January 6 and continues to make a short-term, bullish pattern of higher highs. The pair has broken above both the 20-dma and the 50-dma, and near short-term resistance off three recent high prints between 134.50 and 134.80.

USD/JPY Daily Price Chart – February 15, 2023

Chart via TradingView

Retail Traders are Undecided

Retail trader data show 43.50% of traders are net-long with the ratio of traders short to long at 1.30 to 1.The number of traders net-long is 6.39% higher than yesterday and 3.25% lower from last week, while the number of traders net-short is 0.78% lower than yesterday and 10.18% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed USD/JPY trading bias.

What is your view on the USD/JPY – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.