US Dollar Hits a 20-year High Against the Japanese Yen

JFD Brokers
6 min readApr 19, 2022


The US dollar kept marching north against several of its other major peers yesterday and today in Asia, gaining the most against the Japanese yen. In our view, this is the result of the widening monetary policy divergence between the Fed and the BoJ. Remember that the Fed is expected to proceed with aggressive rate liftoffs this year, at a time when the BoJ has pledged to maintain its ultra-loose policy.


The US dollar traded mixed against the other major currencies on Monday and during the Asian session Tuesday. It gained more than 1% against JPY, and a lot less against EUR, GBP, and CHF. The greenback underperformed versus CAD, AUD, and NZD.

The tumble of the Japanese yen, combined with the strength of the risk-linked currencies Loonie, Aussie, and Kiwi, suggests that market participants may have decided to add to their risk exposure some time yesterday or during the Asian session today. Turning our gaze to the equity world, we see that Wall Street slid fractionally, but appetite improved somehow today in Asia. Among the indices under our radar, Japan’s Nikkei 225 and South Korea’s KOSPI gained, but China’s Shanghai Composite and Hong Kong’s Hang Seng fell, with the latter losing more than 2.5%, perhaps due to a slump in big tech firms listed in the index amid China’s latest regulatory crackdown on the sector.

Most European bourses were closed due to the Easter Monday holiday, and Wall Street stayed pressured, perhaps due to the overly hawkish expectations around the Fed’s future course of action, even after Bank of America’s positive earnings. We get more earnings throughout the rest of the week, with firms including Netflix, Tesla, and Johnson & Johnson. Netflix reports today ahead of the open.

In our view, better earnings results suggest better economic performance, but at this point in time, better economic performance makes the light greener for Fed policymakers to proceed with aggressive tightening in order to curb very high inflation. Thus, we see it hard for Wall Steet to reverse north soon and climb to new record highs. We still believe that the path of least resistance is to the downside.

After all, the greenback has been standing tall as Treasury yields keep rising, exactly due to those expectations. We will reexamine and reevaluate that view in case the Fed, or any individual member, provides information that disappoints. We stick to our guns that the best currency against which someone can exploit dollar gains is the Japanese yen. With the Bank of Japan maintaining an ultra-loose policy, its divergence with other major central banks, and especially the Fed, is widening fast. We do see a decent chance for the USD/JPY pair to test the round figure of 130.00 soon. Overall, we reach to the conclusion that the yen could continue weakening, even if risk appetite is subdued and equities are trading south.


USD/JPY traded higher yesterday, breaking above the 126.80 barrier, signaling the continuation of the uptrend being in force since March 4th. That uptrend is marked by an upside line draw from the low of March 9th. Now, the pair is testing a 20-year high and looks able to continue higher.

We see as the next resistance zone the 129.00 area, marked by the high of May 2002, the break of which could aim for the round psychological number of 130.00. If the bulls are not willing to stop there either, then we could see them climbing much higher, perhaps towards the peak of April 2002, at around 134.00.

Now, in order to start examining the case of a downside correction, we would like to see a clear dip below 125.00, a support marked by the low of April 14th. The rate will already be below the aforementioned upside line, and thus, the bears may get encouraged to push towards the 123.45 barrier or the 122.95 level, marked by the low of April 7th, and the inside swing high of April 4th, respectively. If the latter level is broken as well, then we may experience extensions towards the low of March 31st, at 121.20. Another break, below 121.20, could extend the fall towards inside swing high of March 18th, at 119.40.


Hong Kong’s Hang Seng traded lower yesterday, after hitting resistance at the key zone of 21590 on Thursday. That zone acted as a good support before being broken to the downside on April 11th and thus, as long as the index remains below it, we will consider the short-term outlook to be negative. The fact that the price has started printing lower highs and lower lows on April 4th adds to that view.

At the time of writing, the cash index is testing the low of April 12th, at 20955, the break of which would confirm a forthcoming lower low and may initially pave the way towards the lows of March 9th and 11th, at around 20090. If the bears are strong enough to overcome that hurdle as well, then such a break could carry larger bearish implications, perhaps setting the stage for declines towards the low of March 15th, at 18135.

On the upside, we would like to see a clear recovery back above 22970 before we start examining the bullish case. A forthcoming higher high will already be confirmed, but given the proximity of prior resistance barriers, we’ve chosen a clearance of the 22970 area. This could see scope for advances towards the 23740 zone, or even the 24210 territory, marked by the high of February 23rd and the inside swing low of February 15th, respectively. Now, if the latter barrier is not able to hold either, then we could see the bulls climbing towards the high of February 17th, at 24875, or the high of February 10th, at 25160.


Today, the calendar appears very light, with the only releases worth mentioning being he US building permits and housing starts for March, with both expected to have declined somewhat.


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