The Japanese Yen (JPY) has surged to a 12-week high of 152.64 against the US Dollar (USD) on Thursday, marking its fourth consecutive session of gains. Traders are unwinding carry trades in anticipation of the upcoming Bank of Japan (BoJ) policy meeting next week.
The BoJ is expected to raise interest rates at the meeting, prompting short-sellers to close their positions and fueling the JPY’s strength. Additionally, the BoJ may announce plans to taper its bond purchases, signaling a reduction in monetary stimulus.
Recent US PMI data showing an expansion in private-sector activity for July may lead to a stronger US Dollar. This data supports the Federal Reserve’s (Fed) decision to maintain its restrictive policy stance in the absence of easing inflation.
Investors are keeping a close eye on US GDP data for Q2 and PCE inflation data, which will offer insights into the economic landscape in the United States.
Market Movers: Japanese Yen Gains on Risk Aversion
- The Nikkei 225 Index dropped 2.5% to below 38,200, with tech stocks leading the decline following disappointing earnings from US giants Tesla and Alphabet.
- Japan’s Corporate Service Price Index rose 3.0% year-over-year in June, the fastest pace in over nine years, indicating increasing inflationary pressures.
- BlackRock Investment Institute is bullish on Japan’s equity market due to economic recovery and rising inflation, predicting no rate hike from the BoJ next week.
Technical Analysis: USD/JPY Approaches 152.00
USD/JPY is trading around 152.30, breaking below a descending channel on the daily chart. The RSI is below 30, signaling oversold conditions and a potential rebound.
Support levels for USD/JPY are at 151.86 and 151.00, while resistance levels lie at 154.00 and 155.90.
Japanese Yen FAQ
- The JPY’s value is influenced by the Japanese economy’s performance, BoJ policies, bond yield differentials, and trader sentiment.
- The BoJ intervenes in currency markets to control the Yen’s value, which has depreciated due to ultra-loose monetary policy and policy divergence with other central banks.
- The widening policy gap between the BoJ and other central banks favors the USD against the JPY.
- The JPY is considered a safe-haven asset, strengthening during market turbulence.
By analyzing market movements and central bank actions, investors can make informed decisions to navigate the fluctuations in the USD/JPY pair and capitalize on potential opportunities in the forex market.