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The arbitrage army is pressing forward, and the Japanese yen is retreating steadily
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Official Website]: The arbitrage army is pressing forward, and the Japanese yen is retreating steadily." Hope this helps you! The original content is as follows:
On Wednesday, February 4, the US dollar against the Japanese yen was trading around 156.80 before the market opened. The cumulative increase this week has exceeded 1%, and it is quickly approaching the 157.00 integer mark. From the perspective of short-term rhythm, although there was a brief correction in late January due to rumors of "exchange rate verification", and the yen once rebounded to close to 152.00, the rebound did not last long, and the exchange rate soon resumed its upward trend. Now counting from the low point, the band has rebounded by more than 450 points, almost regaining most of the previous losses, and is only about 250 points away from the high point on January 23. Such a rapid recovery shows that the early decline was more a result of position adjustments caused by news disturbances rather than a fundamental reversal of the fundamental trend.
It is worth noting that whenever the US dollar against the yen approaches 159.00 or even higher, there will always be news in the market that the Japanese authorities may intervene in the market. This operation actually sends a clear signal to global investors: they do not want the exchange rate to easily touch or exceed the sensitive threshold of 160.00. Historical experience shows that such verbal warnings often appear before actual intervention, especially when speculation is overheated and unilateral betting is serious. The current exchange rate is once again approaching 157.00, which means that the market is once again standing on the edge of policy tolerance.
The logic of interest rate differentials is still the core driving force, and carry trades continue to heat up
The fundamental reason for the renewed strength of the U.S. dollar against the yen is still the huge difference in the monetary policies of the two countries. The market currently generally expects that the Federal Reserve will maintain higher interest rates for a longer period of time, and although the Bank of Japan has been promoting policy normalization, the overall pace remains extremely cautious and gradual. In this contextUnder this situation, funds continue to favor the classic arbitrage strategy of "borrowing low-interest Japanese yen and investing in high-yield assets". As long as this interest rate spread structure does not narrow significantly, it will be difficult for the Japanese yen to escape from the situation of passive pressure.
Even if there are periodic intervention or verbal warnings to lower the exchange rate in the short term, it will be difficult to reverse the general direction of capital flows. In other words, once risk sentiment stabilizes, funds shorting the yen will quickly return. This also explains why every time the exchange rate falls, it can always resume its upward trend relatively quickly. The dominant logic of the market has not changed - the www.xmtraders.combination of a strong US dollar and a weak Japanese yen will still dominate in the absence of a major policy shift.
In addition, factors such as Japan's mild domestic inflation and limited wage growth further limit the central bank's room for significant tightening. Under the superposition of multiple factors, analysts believe that unless the pace of interest rate cuts in the United States significantly accelerates, or Japan suddenly accelerates its interest rate hikes, the current pattern will be difficult to fundamentally shake.
The technical side is relatively hot, and you need to be wary of violent fluctuations when chasing highs.
From the technical graphics, the US dollar against the yen showed a step-by-step upward trend at the 60-minute level, with the recent high at 156.852. The current price is running close to this area, showing strong upward momentum. The short-term key support level lies near 156.300, which is regarded as an important watershed in the near future. If the subsequent exchange rate falls below this level, it may enter a short-term consolidation; on the contrary, if it can hold and rise again, the bullish structure will still be intact.
In terms of indicators, MACD is above the zero axis, DIFF is about 0.287, DEA is about 0.234, and the histogram is about 0.107, indicating that the upward momentum is still continuing. What deserves more attention is that the RSI reading has reached 83.618, clearly entering the overbought area, indicating that the market is in a hot state. This means that although the trend is still upward, the risk of chasing higher is accumulating, and rapid retreat or high consolidation may occur at any time.
Especially in the current environment, any disturbance may be amplified. Past cases have shown that verifying rumors is often an "early warning signal" before intervention. Once the exchange rate continues to test above 157.00, the probability of actual market operations will increase significantly. Therefore, every break through a round number mark - such as 155.00, 156.00 and then close to 157.00 - will trigger the market to re-price the "next move", thereby exacerbating volatility.
The policy boundary remains unresolved, and the market has entered a highly sensitive period
The biggest uncertainty at the moment www.xmtraders.comes from the specific boundaries of the Japanese authorities' tolerance for exchange rates. Although there have been many attempts to stabilize the market through verbal intervention or actual buying of yen in history, the bottom line has always been insufficiently transparent. This leads traders to want to follow the trend while always being wary of "black swan" policy impacts. Some analysts pointed out that the authorities may be inclined to wait and see domestic political developments around February 8 before deciding whether to take tougher measures. The existence of this time window further increases the drama of short-term market conditions.
Taken together, the US dollar against the yen is at 156It remains strong near .80. The fundamentals are dominated by interest rate differentials and carry logic, and the technical form also supports further upside. But at the same time, the RSI is on the high side and the risk of policy intervention is rising, causing the upper space to be suppressed by the "risk premium". Especially in the 157.00 to 160.00 range, any sudden signal may trigger a rapid correction of hundreds of points.
The next key question is not whether the exchange rate can reach 157.00, but when it continues to rise, where and how Japan will draw the real red line. This exchange rate game is no longer just a flurry of numbers, but also a tripartite struggle between psychology, policy and capital.
The above content is all about "[XM Foreign Exchange Official Website]: The arbitrage army is pressing forward, and the Japanese yen is retreating steadily". It is carefully www.xmtraders.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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