The Japanese yen continued to decline even after the Bank of Japan showed signs of tightening. According to trading, the USD/JPY exchange rate jumped to its highest level at 145.06, the highest level since November of last year, before settling around the level of 144.66 at the time of writing the analysis on the American holiday, which may weaken investor appetite and weaken liquidity, which ensures stability In narrow ranges for currency pair trading. That is up more than 13% this year 2023 even as the US Dollar Index (DXY) moves sideways.
Overall the Japanese economy is doing well. Its stock market has become one of the best-performing in the world. Its major indices such as the Topix and Nikkei 225 jumped to the highest level in more than three decades as foreign investors piled on. Additional data shows that the Japanese economy is recovering. The latest figures showed that Japanese retail sales jumped 5.7% in May after rising 5.15% in the previous month. This was the 15th consecutive month of growth in the retail sector with tourism booming. Retail sales increased by 1.3% on a monthly basis.
More data showed that household confidence in the country improved to 36.2 from 36 previously. This is an important figure because consumer spending is an important component of the Japanese economy. There are signs that the Bank of Japan will begin to tighten in the near term. In a soon-to-be-announced statement, New Bank of Japan Governor Kazuo Ueda said the bank could begin to normalize policy in the near term if it becomes confident that inflation will pick up in 2024. Inflation remains below 2% but is on the rise.
The USD/JPY currency pair also jumped after signs that the Japanese government will intervene if the Japanese currency continues to decline. For his part, the Finance Minister said in a statement that the government is closely monitoring the currency. In another statement, Masanda Kato, the country's currency diplomat, said the government would not rule out interventions. Last year, the government sold more than $65 billion in foreign reserves when the exchange rate of the US dollar to the Japanese yen jumped to the 150 resistance level. The weakness of the Japanese yen has hurt many Japanese companies that depend on imports.
USD/JPY Technical Outlook
- According to the performance on the daily chart below, the USD/JPY price is still in a strong bullish trend in the past few months.
- It started the year at 126 and has now risen to 145 resistance. Recently, the pair moved above the important resistance at 138, the high of March 7th.
- It has moved above the 50-day moving average.
Meanwhile, oscillators such as the RSI, Stochastic Oscillator, and MACD moved to the overbought level. Therefore, there is a possibility that the pair will re-test the support at 138.76 with high hopes for Japanese intervention in the forex markets to stop the further collapse of the Japanese yen. The dollar/yen currency pair may move in narrow ranges until the markets and investors react to the announcement of the contents of the minutes of the last meeting of the US Federal Reserve, and then the US job numbers.
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