- Amid strong and sharp upward momentum, the price of the US dollar against the Japanese yen (USD/JPY) rebounded upward, breaching the psychological resistance level of 150.00 again, with gains that extended to the resistance level of 150.88, which is its highest level since last November.
- The currency pair broke the key level, which had previously sparked rejection from Japanese authorities.
- This came after the US inflation reading, which was higher than expected, reduced the attractiveness of Japanese assets.
According to the forex trading platforms, the Japanese yen's 1% drop on Tuesday was part of a broader decline in G10 currencies against the US dollar, fueled by speculation that the inflation report will force the Federal Reserve to keep US interest rates at their highest levels in two decades for several years. More months. For his part, Japanese Finance Minister Shunichi Suzuki said on Friday that Japan will continue to closely monitor the yen price. Its value has fallen more than 23% over the past two years, more than any major currency tracked by Bloomberg.
The Japanese yen - which hit a session low of 150.86 on Tuesday afternoon in New York - came under renewed pressure after Bank of Japan Deputy Governor Shinichi Uchida said last week that it was difficult to see the bank raising interest rates continuously and quickly. Uchida also said that financial conditions will remain accommodative — a view previously expressed by Governor Kazuo Ueda — even after the bank ends its negative interest rate policy, given the current outlook for the economy and inflation.
Since the beginning of the year 2024 until now, the price of the Japanese yen has declined by more than 6% against the dollar, which is the biggest loser among the G10 currencies. The currency fell by more than 3% against the euro, which is also the worst performance among its counterparts in developed countries. The Japanese authorities entered the foreign exchange market in September and October of 2022, in their first efforts to support the currency since 1998, and spent about 9 trillion yen ($60 billion).
The move in the US dollar price following the CPI report also led to declines of 1% or more in the Australian dollar, Norwegian krone, Swiss franc, New Zealand dollar and Swedish krona.
On the other hand, Japan's latest economic growth figures are expected to confirm its decline to the world's fourth-largest economy last year, a development that reflects the impact of its weak currency and aging demographics. While the economy is expected to return to annual growth of 1.2% in the fourth quarter after a painful contraction in the summer, the figures for the calendar year will almost certainly show a decline in the value of German output in dollar terms. Meanwhile, the Indian economy is poised to surpass both in the next few years. For a country that was expected to eventually boast the world's largest economy, the recent drop in economic rankings will raise new questions for domestic audiences about the nation's trajectory.
Currently, anxiety among policymakers and the general public in Japan is less severe than it was when the Chinese economy overtook Japan's in 2010, and is now four times larger.
Expectations for the price of the dollar against the Japanese yen today:
As I expected before, USD/JPY is highly likely to move towards the 150.00 psychological resistance again, and through our live trading recommendations page, we always recommend buying USD/JPY from each level. Bearish and with the recent movement and according to performance. On the daily chart above, if the bulls move in the currency pair towards the resistance levels of 150.85 and 151.40, the technical indicators will head towards strong overbought levels, and at the same time expectations regarding the Japanese future will rise. Intervening in the markets to prevent further collapse of the Japanese yen exchange rate.
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