- The Japanese yen struggles to attract buyers in the midst of growing commercial tensions and reduced expectations of uphoe rates.
- The internal political uncertainty keeps the boundions of the defensive JPY in the middle of a stronger USD.
- Operators now wait for inflation figures to the US consumption to obtain significant impulse.
The Japanese Yen (JPY) fights about a minimum of three weeks in front of his American counterpart during Tuesday’s Asian session and seems vulnerable to prolonging a two -week bearish trend. The president of the United States, Donald Trump, showed a willingness to participate in commercial negotiations, feeding the hopes of an agreement between the US and Japan before the deadline of August 1 and providing some support to the JPY. Meanwhile, optimism increases the appetite of investors by more risky assets and acts as an obstacle to the JPY, which is considered a safe refuge.
In addition, the bets that the Bank of Japan (BOJ) would maintain low interest rates for longer than you want, amid concerns about the economic repercussions of the highest tariffs in the US, contribute to limit the JPY. Apart from this, political uncertainty before the elections of the Upper House of Japan on July 20 could stop the JPY’s bulls to make aggressive bets. The operators also seem reluctant before inflation figures to the US consumption, which will provide a significant impulse to the US dollar (USD) and the USD/JPY torque.
The Japanese Yen Alcistas remain defensive while commercial nerves mode
- The president of the United States, Donald Trump, softened his position on trade and told journalists at the White House on Monday that he was open to more commercial negotiations. Trump added that Europe has expressed interest in pursuing a different type of agreement.
- Meanwhile, Trump’s 25% tariff on Japanese products, which will enter into force on August 1, could result in a loss of economic impulse and a colder inflation perspective. This could potentially limit the expectations of an immediate rise in rates by the Bank of Japan.
- In addition, recent opinion polls suggest that the coalition of Japanese Prime Minister Shigeru Ihiba could lose its majority in the next elections in the upper house on July 20. According to the Asahi newspaper, the LDP will probably win only around 35 seats.
- The performance of the Japanese Government Bonus at 10 years (JGB) of reference rose to 1,595% on Tuesday, a level not seen since October 2008, while investors are prepared for the possible loss of the Ihiba Fiscal Falcon, which stress the already fragile Finance of Japan.
- This would further complicate the Boj’s efforts to normalize its monetary policy, which, together with a change in the feeling of global risk, is considered to undermine the Japanese yen and act as a tail wind for the USD/JPY torque on Tuesday.
- The US dollar reached its highest level since June 24 amid the growing acceptance that the Federal Reserve would maintain high interest rates in anticipation of increasing inflation as a result of higher import tariffs and an still resistant US labor market.
- Therefore, the attention is still focused on the publication of the latest inflation figures to the US consumption, which is expected for later on Tuesday. The Consumer Price Index (ICC) is expected to rise a 2.7% year -on -year in June, while the underlying indicator is expected to be located at 3.0% year -on -year.
- However, crucial data will influence market expectations on the Fed fees clippings and determine the short -term trajectory for the USD. Apart from this, commercial developments should provide a new impulse to the USD/JPY torque.
The USD/JPY bulls now wait for a movement beyond the monthly maximum of June around 148.00
The recent rupture through the simple mobile average (SMA) of 100 days and a subsequent fortress beyond the 147.00 mark was seen as a key trigger for the USD/JPY bulls. In addition, the oscillators in the daily chart have been gaining positive traction and are still far from being in overcompra territory. This, in turn, suggests that the path of lower resistance for cash prices remains up and supports the case for an extension of a two -week bullish trend. From the current levels, the maximum of June, around the mark of 148.00, could act as an immediate obstacle, above which the pair of foreign exchange could test the region of 148.65 (Maximum of May) before aiming to recover the round figure of 149.00.
On the contrary, any significant corrective sliding could be seen as a purchase opportunity near the region of 147.20-147.15. This is closely followed by the 147.00 mark, below which the USD/JPY torque could accelerate the fall to the 146.60-146.55 region on the route to the round figure of 146.00 and the 100-day SMA, currently located near the 145,80 region. The latter should act as a key point and a convincing rupture below could change the short-term bias in favor of the bassists, racing the way for a fall to the 145.50-145.45 area on the route to the psychological brand of 145.00.
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.
