- USD/JPY stable as Fed minutes hint at easing and 10-year US Treasury yields decline.
- The selling momentum continues; the RSI indicates further downside potential.
- Below 145.00, targets are 143.61, then 141.69; resistance at 146.00 could extend to 146.92, 149.39.
USD/JPY is giving back some of its earlier gains after the July Federal Reserve meeting minutes suggested that the Fed could ease monetary policy as early as September. As a result, US Treasury yields, particularly the 10-year yield, collapsed, weighing on the benchmark rate due to its positive correlation. At the time of writing, USD/JPY is trading at 145.21, virtually unchanged.
USD/JPY Price Forecast: Technical Outlook
After falling to a seven-month low of 141.69, the USD/JPY pair recovered somewhat to reach a two-week high of 149.39 before resuming its ongoing downtrend. The momentum is supporting the sellers, as shown by the Relative Strength Index (RSI).
If USD/JPY breaks below 145.00, the August 6 daily low of 143.61 will be reached. Once this is reached, the next support is at 141.69, followed by the December 28 low of 140.25.
On the other hand, if prices rise above 146.00, this could pave the way for further upward movements. The next resistance would be the Tenkan-Sen at 146.92, followed by 149.39, before the Kijun-Sen at 149.78.
USD/JPY price development – daily chart
Frequently asked questions about the Japanese yen
The Japanese yen (JPY) is one of the most traded currencies in the world. Its value is largely determined by the performance of the Japanese economy, more specifically by the policies of the Bank of Japan, the difference between Japanese and US bond yields or the risk appetite of traders, among other factors.
One of the Bank of Japan’s responsibilities is currency control, so its actions are crucial for the yen. The BoJ has sometimes intervened directly in foreign exchange markets, generally to lower the value of the yen, although it often refrains from doing so due to political concerns among its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive economic stimulus, has led to a depreciation of the yen against its major counterpart currencies. This process has recently worsened due to a growing policy divergence between the Bank of Japan and other major central banks, which have opted to raise interest rates sharply to combat decades of high inflation.
The BoJ’s stance of maintaining its ultra-loose monetary policy has led to a growing divergence in its policies with other central banks, particularly the US Federal Reserve. This is leading to a widening of the spread between the US and Japanese 10-year bonds, favoring the US dollar against the Japanese yen.
The Japanese yen is often viewed as a safe haven asset. This means that during times of market stress, investors are more likely to put their money into the Japanese currency because it is seen as reliable and stable. Turbulent times are likely to strengthen the yen’s value against other currencies that are considered riskier.
