The Japanese Yen (JPY) has recently edged higher following the Japanese government’s decision to allocate ¥989 billion towards energy subsidies. This move has given a boost to the currency in the forex market, as investors see it as a positive step to support the economy. However, this increase in the value of the JPY comes at a time when the country is facing challenges in its manufacturing sector, with weak data fueling speculation that the Bank of Japan (BoJ) might postpone further rate hikes. This uncertainty surrounding the BoJ’s policies has put pressure on the JPY in recent trading sessions.
On the other hand, the US Dollar (USD) has been receiving support from improving Treasury yields, which has helped to strengthen the currency against its major counterparts. The US Bureau of Economic Analysis recently reported that the headline Personal Consumption Expenditures (PCE) Price Index increased by 2.5% year-over-year in July, matching expectations but falling slightly short of estimates. The core PCE, which excludes volatile food and energy prices, also rose by 2.6% year-over-year, in line with previous figures but slightly below consensus forecasts.
In Japan, the Consumer Price Index (CPI) increased in August, signaling a rise in inflationary pressures. However, the country’s Unemployment Rate unexpectedly climbed to 2.7% in July, marking the highest level since August 2023. These mixed economic indicators have added to the uncertainty surrounding Japan’s economic outlook.
Meanwhile, the Federal Reserve Bank of Atlanta President, Raphael Bostic, hinted at the possibility of rate cuts in light of cooling inflation and higher unemployment rates. This cautious stance has raised concerns about the future trajectory of US monetary policy and its impact on the USD.
At present, the USD/JPY pair is trading around 146.70, with technical indicators pointing towards a bearish trend. The nine-day Exponential Moving Average (EMA) is below the 21-day EMA, while the Relative Strength Index (RSI) remains below 50. In terms of support levels, the pair could test the 145.91 level, followed by the seven-month low of 141.69. On the upside, resistance is seen at 146.97, with potential targets at 150.00 and 154.50.
The USD/JPY exchange rate is currently influenced by a combination of economic data, monetary policies, and market sentiment. The outlook for both currencies remains uncertain, with key indicators and policy decisions likely to drive future price movements. Traders and investors will need to closely monitor developments in both the US and Japanese economies to assess potential trading opportunities in the forex market.
Leave a Reply