The current state of the Japanese currency can be compared with the position of the pendulum, when it is not known in which direction the arrow can swing - up or down. This gives rise to volatility and somewhat conflicting forecasts for the yen. Basically, experts are inclined to weaken the currency of the Land of the Rising Sun.
On Tuesday, September 24, the Japanese currency was recorded in the market after a meeting of the British Supreme Court, which was caused by the actions of Prime Minister Boris Johnson. The department decided that the suspension of the British Parliament by the government was illegal. Subsequently, the USD / JPY pair showed an increase of 0.1% to 107.67, after a maximum of 107.80 was recorded on Monday.
Meanwhile, experts believe a possible reduction in the key rate by the Japanese regulator as one of the risks of weakening the currency of the Land of the Rising Sun. Representatives of the Bank of Japan expressed their readiness to support the economy with stimulating measures and make adjustments to the current monetary policy. According to Haruhiko Kuroda, head of the Central Bank of Japan, authorities do not rule out further interest rate cuts.
Why does this fact cause concern among analysts and market participants? Perhaps, the whole thing is the events of nine years ago. Recall that in October 2010, the Bank of Japan reduced the base interest rate to almost zero, which provoked a rapid collapse of the yen. A significant weakening of the national currency was necessary to restore the Japanese economy, but hit the market hard. No such surprises are currently expected, but the current state of affairs keeps the market in good shape.
Shyam Devani, lead technical strategist at Singapore's Citigroup, shared his vision on the yen. After analyzing the potential volatility of the USD / JPY pair for three months, he predicted the growth of this volatility in October 2019. At the same time, the USD / JPY spot rate is expected to fall, the analyst stressed. It can be noted that in a few weeks, the pair sank from 104.50 to 105, and subsequently for several months fell below 100.
Currently, the pair was trading near the levels of 107.35–107.42. However, the situation will not always be in favor of the yen, and the "pendulum" of prices may swing in a different direction, S. Devani is sure. He claims that the Japanese currency could strengthen to 99.00 per 1 US dollar. According to the analyst's forecast, this could happen in the coming months. The catalyst for this step will be renewed purchases of US treasury bonds by investors.
The assertion of the analyst by Citigroup is not shared by many experts, believing that such a price "swing" for the yen is hardly possible. Nevertheless, the Japanese currency is already showing signs of decline, reaching 107.27–107.28, and market participants recommend selling it. Despite the current low activity of sellers, they bring the yen closer to the support level of 106.70 by their actions. A breakthrough of this level will lead to a more powerful downward movement directed to the level of 105.80 and even lower - to 105.50. Analysts are sure that if this option is implemented, the Japanese currency will drop to the psychologically important indicator of 105.00. At the moment, the bearish scenario remains a priority, experts summarize.