In July, the Japanese government revised its growth forecasts for the fiscal year ending March 2025 from 1.3% to 0.9%. The government expressed concerns about the weak Yen and its impact on households’ purchasing power. The private-sector members of the council also discussed the new growth forecasts in a meeting, acknowledging the challenges faced by the economy. Bank of Japan Deputy Governor Ryozo Himino emphasized the influence of exchange rate fluctuations on economic activity and inflation beyond just import prices.
FOMC Interest Rate Decision and USD/JPY Trends
In Q1 2024, private consumption in Japan fell by 0.7%, leading to a 0.5% contraction in the overall economy. The upcoming FOMC interest rate decision and press conference have put the US dollar in focus. Analysts predict that the Fed will keep interest rates unchanged, but Fed Chair Powell’s stance on inflation, the labor market, and future rate cuts will be crucial. A dovish approach from the Fed could push the USD/JPY below 150, while concerns about inflation might result in a rise above 155.
The trends of USD/JPY will depend on the monetary policy decisions and forward guidance from both the Bank of Japan and the Federal Reserve. Aggressive cuts by the BoJ and potential rate hikes could drive the USD/JPY below 150. On the other hand, if the Fed hints at rate cuts in September and December, the USD/JPY may drop towards 145. Investors are advised to closely monitor real-time data, central bank decisions, and expert opinions to adjust their trading strategies accordingly. Keeping updated with the latest news and analysis is essential to manage USD/JPY volatility effectively.
The USD/JPY has remained below the 50-day Exponential Moving Average (EMA) while staying above the 200-day EMA. The EMAs indicate a bearish short-term outlook but a bullish long-term perspective on the price movements. A potential return of USD/JPY to the 155 handle could lead to a test of the 50-day EMA and possibly a move towards 160. However, a break below the 200-day EMA and the 151.685 support level could signal a drop below 150. The Relative Strength Index (RSI) at 27.20 suggests that the USD/JPY is currently oversold, indicating a potential increase in buying pressure at the 50-day EMA.
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