Yen weakens after good US GDP data

The yen may enter a period of consolidation if the Tokyo Consumer Price Index does not provide support.

Traders reversed their positions on the overbought yen around the key level of 152 after strong U.S. GDP data calmed the stock markets. The Japanese currency also weakened against many of its risk-sensitive counterparts, falling 1.5% against the Australian dollar on “very low” trading volume.

• Key support zone where quotes rebound
• 200 MA
• Horizontal support
• 50 fibo
• The second count of Sequential continues downwards, exhaustion arrow on the short on yesterday’s bar after the 9 on the previous one
• The Demarker oscillator continues to deepen into oversold, but slows down and is about to turn
• Price action with a reversing pin bar above 38.2
  Likely corrective upward movement for profit-taking towards 155, followed by a new short attempt towards 153 and a temporary consolidation attempt around 154.

Despite this, there is reluctance to enter new short positions on the yen due to high levels of current volatility and risks associated with the central bank next week. This may change if the Bank of Japan keeps the interest rate unchanged at 0.10% and offers a dovish outlook for monetary policy.

Besides central bank policies, three other factors work against yen sellers: First, futures traders are short on the Japanese currency and use options for both hedging and adding to these positions when the yen appreciates. Second, the risks of intervention will continue as Japanese policymakers complain about the weak yen and high import costs. Third, the nearly two-year period of declining volatility may have ended in March. Since then, there have been several currency swings, foretelling more volatility, including a mysterious flash crash of the peso-yen on April 19.