Daily Analysis USDJPY - 14 Aug 2023

USD/JPY bulls take a momentary pause at the highest level seen in a year, as market participants search for further indications to sustain the Yen pair's earlier climb towards refreshing the Year-To-Date (YTD) peak during the initial hours of Monday's European session. This situation underscores the impact of the Bank of Japan's (BoJ) interventions in the bond market and the US Dollar's retreat, despite prevailing negative sentiment.

In line with this, the Bank of Japan (BoJ) offered an unlimited supply of Japanese Government Bonds (JGBs) with residual maturities of 5-10 years at a fixed rate early on Monday in Asia. This move by the Japanese central bank serves to temper the yields on crucial JGBs, thereby stabilizing the Japanese Yen (JPY) value.

Conversely, the US Dollar Index (DXY) retraces from its one-month high, reaching 102.95 at the present moment, as market participants continue their quest for further cues to extend the risk-averse sentiment that characterized the start of the week, even as concerns stemming from China diminish. Worth noting is the suspension of bond trading by China's Country Garden and the non-receipt of payments from a subsidiary of the Chinese conglomerate Zhongzhi Enterprise Group, both of which contribute to China's debt concerns. Additionally, Russia's announcement of equipping new nuclear submarines with hypersonic missiles and the ongoing US-China trade tensions further contribute to the prevailing risk-off sentiment.

The combination of these risk-averse headlines, along with the buoyant US Treasury bond yields and apprehensions surrounding the Bank of Japan's (BoJ) commitment to its ultra-easy monetary policy, has propelled the USD/JPY price towards revisiting the YTD high at 145.25.

A potential intervention in the market by the Japanese central bank and official authorities might be necessary to prevent the yen from declining further. A breach of the current resistance level could lead to the 146.50 resistance level, while a retracement from the existing resistance level could drive the price toward the 144.00 support level.