• USDJPY is hovering around its 2023 high ahead of this week’s key events

• Bulls remain in control, but the stochastic oscillator could signal a reversal soon

• Intervention rumours could also help the bears stage a move towards 144.99

USDJPY continues to trade at extremely elevated levels as market participants are gearing up for the imminent key events. The bulls remain on high alert especially as the stochastic oscillator is at a precarious position. It continues to trade in its overbought territory, orbiting around its moving average.

A possible break below both its MA and overbought area would be seen as a strong bearish signal. However, the Average Directional Movement Index (ADX) remains on the bulls’ side as it continues to signal a muted bullish trend in the market, despite the aggressive rally from the January 2023 lows. Similarly, the RSI remains comfortably above the 50-midpoint, confirming the current bullish tendency.

Should the bears feel energized to stage a pullback, they would try to push USDJPY below the 78.6% Fibonacci retracement of October 21, 2023 – January 16, 2023 downtrend at 146.65, and towards the September 7, 2022 high at 144.99, as well as the lower boundary of the upward sloping trend channel respectively.  Even lower, the 50-day simple moving average (SMA) at 144.12 and the 61.8% Fibonacci retracement at 142.49 could really test the bears’ determination. 

On the flip side, the bulls are waiting for the next key market event, and despite the risk of a strong reaction from Japanese authorities, they appear ready to register a new 2023 high. The path then appears to be unhindered until the October 21, 2022 high at 151.94.

To sum up, most market participants remain on the sidelines ahead of the key market events, but the bears are trying to find a way to regain the market reins. However, only the stochastic oscillator could turn the tide in their favour and allow them to stage a short-term pullback towards 144.99.