Technical Analysis:
The USD/JPY pair has been on a downward trajectory, with the current decline from 158.86 viewed as the third leg of a pattern originating from the 161.94 high. Key support levels include the 61.8% retracement of the 139.57 to 158.86 range, situated at 146.32. On the upside, resistance is identified at 150.92; a break above this level could signal short-term bottoming and potentially lead to a stronger rebound.
Fundamental Factors:
• Speculative Positioning: There has been a significant increase in net long positions in yen futures among non-commercial traders, reaching 96,000 contracts, equivalent to an $8 billion bet on the yen's appreciation. This surge reflects growing expectations of further interest rate hikes by the Bank of Japan (BOJ), driven by stronger-than-expected inflation data.
• Monetary Policy Shifts: The BOJ has adopted a more hawkish stance, raising interest rates to a 17-year high of 0.5%. This shift contrasts with its previous negative rates and has impacted the attractiveness of yen-funded carry trades, which were previously profitable due to low Japanese yields.
• Global Economic Conditions: The U.S. economy is experiencing "mini-stagflation," characterized by slowing growth and persistent inflation. This environment, coupled with the BOJ's policy normalization, could disrupt yen-funded carry trades that have supported certain asset bubbles, notably in U.S. equities.