- The Japanese yen remains depressed in the midst of the decrease in the probabilities of an immediate rise rise in the boxwood.
- The internal political uncertainty weighs even more about the JPY in the middle of the recent upward rebound of the USD.
- The reduced betting bets of Fed fees continue to support the high yields of American bonds and benefited the dollar.
The Japanese Yen (JPY) reached a new minimum since April in front of his US counterpart during the Asian session on Wednesday, with the USD/JPY bulls now waiting for a sustained strength beyond the level of 149.00 before opening new positions. Investors reduced their bets for an immediate rise in interest rates by the Bank of Japan (BOJ) amid concerns about the economic repercussions of the highest US tariffs.
In addition, internal political uncertainty before the elections of the Chamber of Counselors on July 20 keeps the guns of the JPY on the defensive, which, together with the recent Rally of the US dollar (USD), provides support to the USD/JPY pair. In fact, the dollar index (DXY), which follows the value of the dollar against a foreign exchange basket, reached its highest level since June 23 after the publication of the US consumer inflation figures on Tuesday, which reaffirmed the expectations that the Federal Reserve (Fed) would delay the cuts of wins.
Japanese Yen bears maintain control while operators reduce bets due to another rise in Boj rates in 2025
- Recent surveys indicate that the ruling coalition of Japan – the ruling coalition of the Democratic Liberal Party (LDP) and Komeito – could lose its majority in the elections of the Upper House scheduled for July 20. This could increase both fiscal and political risks in Japan and complicate trade negotiations amid the imminent US tariffs about Japanese exports.
- The president of the United States, Donald Trump, revived concerns about the commercial war last week and issued notices to key commercial partners, including Japan, delineating individual tariff rates from August 1. Japan faces a 25% punitive tariff over all exports to America in the midst of stagnant trade negotiations between the US and Japan, particularly on the protection of the Japan rice market.
- This occurs at a time when economic growth in Japan has been decelerating. In addition, the decrease in real wages and the cooling signs of inflationary pressures could further complicate the normalization schedule of the monetary policy of the Bank of Japan, which turns out to be a key factor behind the low performance of the Japanese Yen against the US dollar.
- The operators reduced their bets for a rate cut by the Federal Reserve later this month after the publication of the optimist Employment Report of the US June. In addition, the data published on Tuesday showed that US consumer prices increased to its largest extent in five months, reaffirming the market expectations that the Federal Reserve would remain on the sidelines until September.
- The US Labor Statistics Office reported that the Consumer Price Index (CPI) general rose 0.3% in June and the annual rate accelerated to 2.7% from 2.4% in May. Meanwhile, the underlying indicator, which excludes fluctuating costs of food and energy, increased 2.9% from the previous 2.8%, raising the yields of US Treasury bonds to their highest levels in several weeks.
- The president of the Boston Fed, Susan Collins, said it is a challenge to establish monetary policy at this time in the midst of uncertainty, and a solid economy gives the US Central Bank time to decide its next movement of interest rates. Tariffs could boost inflation in the second half of 2025 and bring underlying inflation to about 3% by the end of the year, Boston added.
- Separately, the president of the Fed of Dallas, Lorie Logan, said that the base case is that monetary policy needs to be adjusted for a time to reduce inflation. Logan added that tariff increases seem likely to create additional inflation for some time, and an early cut of rates by the Fed risk leaving deeper economic scars on a longer path towards price stability.
- The operators now expect the publication of the US Production Price Index that will be given later during the North American session. Apart from this, the comments of influential members of the FOMC will boost the USD and the USD/JPY. The fundamental background, meanwhile, suggests that the path of lower resistance for the torque is upwards.
The USD/JPY needs to consolidate before the next upward movement in the middle of an overcompared RSI in schedules
From a technical perspective, the night break through the level of 148.00 (maximum of June) and a later movement beyond the maximum of May, around the 148.65 zone, it could be seen as a new trigger for the USD/JPY bullies. That said, the relative force index (RSI) has approached the level of 70 in the daily graph. Therefore, it will be prudent to expect some short -term consolidation or a modest setback before positioning for any additional upward movement.
Meanwhile, the corrective slide now seems to find some support near the region of 148.65, below which the USD/JPY torque could slide towards the round figure of 148.00. Any additional fall could be seen as a purchase opportunity and remain cushioned near the horizontal zone of 147.60-147.55. The latter should act as a key point, which, if it breaks, could cause some technical sales and drag cash prices towards the level of 147.00 en route to the support of 146.30-146.25.
On the other hand, a sustained strength and acceptance above the round figure of 149.00 could raise the USD/JPY torque towards the next relevant obstacle near the region of 149.35-149.40. The impulse could extend even more, although it is more likely that in front of strong resistance near the psychological level of 150.00.
Japanese – frequent questions
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
