Japanese yen weakens to 1998 low as Nasdaq 100 rallies, eyes on Asia-Pacific

Japanese Yen, USD / JPY, Wall Street, Nasdaq 100 – Asia Pacific Market Open

  • The USD / JPY is rising to its highest level since 1998, while the Nasdaq 100 is rising
  • The yen weakness continued after the BoJ maintained the pigeon policy
  • Will the Nikkei 225, ASX 200, Hang Sang meet on Wednesday?

Tuesday’s market overview – Market rally across the globe lowers the Yen further

The anti-risk Japanese yen was crushed on Tuesday as market confidence hit global stock markets – see chart below. On Wall Street, futures following the Nasdaq 100, S&P 500 and Dow Jones rose 2.48%, 2.5% and 2.2% respectively. During the European Hours, Euro Stoxx 50 and FTSE 100 rose 0.7% and 0.42% respectively. This is because Japan’s Nikkei 225 rose 1.84%, while Australia’s ASX 200 rose 1.41%.

Are markets starting to price in the next Federal Reserve easing cycle? That does not seem to be the case. Government interest rates had mostly changed slightly over the past 24 hours. The US overall CPI expectations (YoY) for 2023 were barely shifted from the end of last week. You can also look at the 1-year breakeven rate to measure inflation estimates, and they were also slightly changed from Friday.

With that in mind, it looks like there could have been a display of exhaustion to start the holiday-shortened week for Wall Street. We are also nearing the end of the second quarter and opening the door to rebalancing activity.

This meant bad news for the yen, which tends to underperform when the general market sentiment is rosy. As a result, risk appetite helped push the USD / JPY to its highest level since 1998! Last week The Bank of Japan defended its ultralight policy despite total inflation now slightly above target. Although it offered some verbal shocks to the rapidly weakening currency, it did little physically to defend it, leaving it vulnerable to what happened in the markets on Tuesday.

Japanese yen falls while stock prices rise on Tuesday

Japanese yen weakens to 1998 low as Nasdaq 100 rallies, eyes on Asia-Pacific

Chart created in TradingView

Wednesday’s Asia Pacific Trading Session – Focus on risk appetite

Wednesday’s Asia-Pacific economic document is quite light, which puts the focus for traders on the overall risk appetite. The rather rosy session on Wall Street may mean some follow-up for regional exchanges, which may open the door for Hong Kong’s Hang Seng index to rise alongside the Nikkei 225 and ASX 200. This may continue to leave the Japanese yen in jeopardy. However, it remains difficult to be fundamentally bullish stocks at the moment.

USD / JPY Technical Analysis

The USD / JPY shot higher above the 135.16 – 135.57 resistance zone, which consisted of the 2002 peak. This has pushed to levels last seen in 1998, revealing the 78.6% Fibonacci expansion to 139.68. Confirmation of the outbreak is lacking so far as negative RSI divergence continues. The latter is a sign of fading upward momentum, which may precede a lower turn. In such a case, keep a watchful eye on the rising trend line from March, which may reinstate an upward focus.

USD / JPY daily chart

Japanese yen weakens to 1998 low as Nasdaq 100 rallies, eyes on Asia-Pacific

Chart created in TradingView

— Written by Daniel Dubrovsky, Strateg to Technewscity

To contact Daniel, use the comment box below or @ddubrovskyFX on Twitter