- USD/JPY is up 0.38%, boosted by rising US Treasury yields and weak ISM data.
- Resistance levels: 162.00, 163.00, 164.87 (November 1986 high).
- Support Points: 160.22 (April 29 High), 155.66 (Tenkan Sen), 158.90 (Senkou Span A).
The USD/JPY has broken the 161.00 barrier as US Treasury bond yields rose sharply on Monday after US economic data showed that manufacturing activity, as measured by the ISM PMI, contracted for the third consecutive month in June. The pair is trading at 161.49, gaining 0.38%.
USD/JPY Price Analysis: Technical Outlook
The pair has a bullish bias, and lack of action from Japanese authorities and the Bank of Japan (BoJ) could push USD/JPY higher. Despite that, the next key resistance level would be the November 1986 monthly high of 164.87, but traders need to reclaim key resistance levels on their way north.
Momentum is favoring buyers, although the Relative Strength Index (RSI) is overbought, but due to the nature of a strong move, the most extreme condition would be the 80 level.
That said, the first resistance for the USD/JPY would be 162.00, followed by the 163.00 level. A break of the latter would expose 164.00 and the November 1986 high.
Conversely, if the sellers drag the exchange rates below 161.00, the first support would be the April 29 high at 160.22. Once this hurdle is overcome, the next line of defense for the bulls would be the Tenkan Sen at 155.66, followed by the Senkou Span A at 158.90.
USD/JPY Price Action – Daily Chart
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by the performance of the Japanese economy, but more specifically by the policy of the Bank of Japan, the spread between Japanese and US bond yields, and risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key to the Yen. The BoJ has intervened directly in currency markets on occasion, usually to lower the value of the Yen, although it often refrains from doing so due to political concerns of its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its major currency peers. This process has been exacerbated more recently by a growing policy divergence between the BoJ and other major central banks, which have opted to sharply raise interest rates to combat decades-old levels of inflation.
The Bank of Japan’s stance of maintaining an ultra-loose monetary policy has led to an increase in policy divergence with other central banks, in particular with the US Federal Reserve. This favours the widening of the spread between US and Japanese 10-year bonds, which favours the Dollar against the Yen.
The Japanese Yen is often considered a safe haven investment. This means that in times of market stress, investors are more likely to put their money into the Japanese currency due to its perceived reliability and stability. In turbulent times, the Yen is likely to appreciate against other currencies that are considered riskier to invest in.
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.
