Japanese Yen Weakens After Trade Balance Data Release
The Japanese Yen (JPY) has ended its three-day winning streak against the US Dollar (USD) following the Trade Balance data release on Wednesday. Despite the decline, the JPY’s downward trend may be limited due to expectations of another interest rate hike in the near future. Traders are also looking forward to Bank of Japan (BoJ) Governor Kazuo Ueda’s appearance in parliament on Friday to discuss the recent interest rate hike decision.
In July, Japan’s Merchandise Trade Balance swung to a deficit of ¥621.84 billion from a surplus of ¥224.0 billion in June, missing market estimates. This marks the fifth deficit this year, driven by a faster increase in imports compared to exports.
Meanwhile, the US Dollar (USD) is trying to end its three-day losing streak as traders approach the FOMC Meeting Minutes for July’s policy decision. The market is also awaiting a speech from Fed Chair Jerome Powell at Jackson Hole on Friday.
The CME FedWatch Tool indicates a 67.5% probability of a 25 basis points rate cut in the September meeting, down from 76% previously. The likelihood of a 50 basis points rate cut has decreased to 32.5% from 53.0% a week ago.
Analysis
- Economists predict a potential interest rate hike by the Bank of Japan by the end of the year.
- Japan’s imports surged in July, while exports also increased, but fell short of market forecasts.
- Federal Reserve officials express caution about making policy changes.
- The Bank of Japan expects a strong economic recovery to justify further rate hikes.
- US central bank officials emphasize a gradual approach to reducing borrowing costs.
- Japan’s GDP growth exceeded expectations in Q2, showing strong quarterly and yearly expansion.
Technical Analysis
USD/JPY is trading around 145.50, consolidating under a downtrend line on the daily chart, suggesting a bearish bias. The 14-day RSI indicates a potential correction for the pair.
For support levels, USD/JPY could test 144.00, 143.00, and a seven-month low of 141.69. On the upside, resistance levels are at 146.80 and 154.50.
Japanese Yen Today
The Japanese Yen has shown various percentage changes against major currencies today, with the strongest performance against the New Zealand Dollar.
Japanese Yen FAQs
- The value of the Japanese Yen is influenced by the Japanese economy’s performance, BoJ policy, bond yield differentials, and risk sentiment among traders.
- The BoJ’s ultra-loose monetary policy has caused the Yen to depreciate against other currencies.
- Policy divergence between the BoJ and other central banks supports a stronger US Dollar against the Japanese Yen.
- The Japanese Yen is considered a safe-haven investment during market stress, strengthening its value.
This comprehensive analysis provides insights into the current market conditions and factors affecting the Japanese Yen and US Dollar, helping investors make informed decisions about their finances.