USD/JPY Price Forecast: Post modest gains yet remains shy of 145.00
|- Bearish technical outlook persists; pair remains below Ichimoku Cloud and 200-DMA, hinting at further declines.
- RSI suggests seller dominance, despite a temporary buyer-led recovery.
- Resistance levels to watch: 145.39 (Tenkan-Sen), 146.00, 146.92 (Senkou Span A), 148.45 (Kijun-Sen).
- Downside break below 144.00 targets 143.44 (August 26 low), with potential to test monthly low at 141.69.
The USD/JPY registered modest gains during the North American session on Thursday of over 0.27%. During the trading day, the pair retreated to a daily low of 144.22 but bounced off and ended the session near the 145.00 figure. At the time of writing, the major trades at 144.97 were virtually flat as Friday’s Asian session began.
USD/JPY Price Forecast: Technical outlook
From a technical perspective, the pair is downward biased despite registering a leg-up. Once the USD/JPY slid below the Ichimoku cloud and the 200-day moving average (DMA), it opened the door to posting a multi-month low of 141.69. Since then, the major enjoyed an uptick but failed to gain traction to clear the 150.00 figure.
The Relative Strength Index (RSI) shows sellers are in charge, although buyers enjoy a short-term leg-up.
If USD/JPY decisively clears 145.00, this could pave the way for further upside. Once it moves up, the first resistance would be the Tenkan-Sen at 145.39, followed by the 146.00 figure. Up next would be the Senkou Span A at 146.92, ahead of testing the Kijun-Sen at 148.45.
Conversely, if sellers push the exchange rate below 144.00, the next support would be the August 26 daily low of 143.44. A breach of the latter will expose the August monthly low of 141.69.
USD/JPY Price Action – Daily Chart
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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