The Japanese yen continues to rally. USD/JPY is trading at 148.86 in the European session, down 0.31% on the day at the time of writing. On Thursday, the yen strengthened as much as 148.50, its best showing since May 11.
Yen continues to pummel US Dollar
Only three weeks ago, the yen looked dead in the water. USD/JPY was trading just shy of 162, its highest level in almost four decades. Since then, the yen has been on an absolute tear, rising a staggering 7.9%, including 3.1% this week.
What is driving the yen’s spectacular turnaround? First, the Bank of Japan raised interest rates this week to 0.25%. Although rates remain at low levels, this rate increase, the second since March, indicates that the BoJ is slowly making the shift to normalization after decades of an ultra-loose accommodative policy.
The BoJ also announced it would taper its bond purchases, which is another tightening step.
Second, investors have become less enthusiastic about the US dollar now that a September cut is looking very likely and are looking to park their assets elsewhere.
The US economy is showing some signs of weakness, such as this week’s ISM manufacturing PMI for July, which posted the sharpest contraction since November 2023. This has driven funds away from the US dollar towards safe-haven assets such as the yen. Today’s nonfarm payrolls are expected to fall from 206 thousand to 175 thousand, which could further boost the yen at the expense of the US dollar.
This week’s BoJ rate hike showed that change is afoot in Japan and the government’s annual white paper on economic and fiscal policy, which was released today, supported that view. The white paper said that Japan was showing signs of breaking out of deflation, noting that businesses were now passing on costs to consumers due to increased costs from the yen’s sharp decline.
USD/JPY technical
-
USD/JPY continues to break below support levels. Earlier, it pushed below support at 149.19 and is testing support at 148.72. Below, there is support at 149.59.
-
150.03 and 150.44 are the next resistance lines.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recommended Content
Editors’ Picks
AUD/USD struggles to lure buyers; focus remains on FOMC meeting
AUD/USD trades with a positive bias for the second straight day, albeit it lacks bullish conviction and remains close to the YTD low touched last week. China's economic woes, US-China trade war fears and the RBA's dovish shift continue to act as a headwind for the Aussie.
USD/JPY flat lines around 154.00, eyes on US Retail Sales release
The USD/JPY pair trades flat around 154.10 during the early Asian session on Tuesday. Traders prefer to wait on the sidelines ahead of the Federal Reserve and the BoJ interest rate decision later this week. On Tuesday, the US November Retail Sales will be published.
Gold price stuck in a range around $2,650 as traders await Fed decision
Gold price extends its sideways consolidative price move during the Asian session on Tuesday as traders await the highly anticipated FOMC policy decision before placing directional bets. In the meantime, bets for a less dovish Fed, elevated US bond yields and a positive risk tone should cap the XAU/USD.
Ethereum faces staking withdrawal headwind amid sustained ETF inflows
Ethereum is up 2% on Monday, surging above a key symmetry triangle following sustained institutional interest via ETH exchange-traded funds investors. However, rising withdrawals across staking protocols could halt the bullish momentum.
Five fundamentals for the week: Fed dominates the last full and busy trading week of the year Premium
Christmas is coming – but there's a high likelihood of wild price action before the holiday season begins. Central banks take center stage, and there is enough data to keep traders busy outside these critical decisions.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.