What Happened
Currency strategist Geoff Yu at BNY has highlighted that the Japanese Yen (JPY) is still significantly undervalued on a Real Effective Exchange Rate (REER) basis, even as the Euro and US Dollar valuations have moved closer together. USD/JPY currently trades around 154.50, well above the long-run fair value range that many analysts place near 130.00โ135.00. The gap represents one of the largest valuation dislocations in the G10 currency space.
Key Levels โ USD/JPY
- Support 1: 152.00 โ recent consolidation floor and psychological level
- Support 2: 149.40 โ the April 2024 intervention zone watched closely by the Bank of Japan
- Resistance 1: 156.00 โ near-term ceiling where selling pressure has emerged
- Resistance 2: 158.50 โ 2024 multi-decade high, a break above would escalate intervention risk sharply
Technical Picture
USD/JPY remains in a broad uptrend on the weekly chart, trading above its 50-day moving average (~152.80) and 200-day moving average (~151.20). However, RSI on the daily chart is sitting near 62 โ not yet overbought, but approaching territory where prior rallies have stalled. A weekly close below 152.00 would be a meaningful technical warning sign.
What Traders Are Watching
Australian traders should monitor USD/JPY closely because a rapid Yen strengthening event โ triggered by Bank of Japan policy shifts or coordinated G7 intervention โ could hit risk assets hard. Historically, a sharp Yen rally has pressured the ASX 200 (watch support at 7,750), weighed on iron ore (currently ~$105/tonne, support at $98), and provided a short-term boost to gold (resistance at $2,400). A move through 149.40 on USD/JPY would be the clearest trigger signal.
Bias
Bearish USD/JPY (Yen bullish bias) โ The extreme REER undervaluation identified by BNY, combined with growing Bank of Japan policy normalisation pressure, tilts the medium-term risk toward a stronger Yen. Traders should treat any rallies toward 156.00โ158.50 as potential selling opportunities rather than breakout entries.
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