- USD/JPY rises more than 180 pips, testing key resistance at 142.35 (Tenkan-Sen).
- A break above 143.04 could target resistance at 143.15 (Senkou Span A) and 144.48 (Kijun-Sen).
- A drop below 142.00 could see the pair resume its downtrend, with support at 139.58 (yearly low) and 139.00.
The USD/JPY surged at the end of the North American session, trading at 142.44, up more than 1% after bouncing from a daily low of 140.32. Strong US data increased investors’ uncertainty about the size of a Federal Reserve rate cut as they awaited its monetary policy decision on Wednesday. Therefore, traders shorting the US Dollar reduced their positions, as seen in the price action of the USD/JPY pair.
USD/JPY Price Forecast: Technical Outlook
From a technical perspective, USD/JPY remains biased lower despite rallying over 180 pips to test the Tenkan-Sen at 142.35. The Relative Strength Index (RSI) remains biased lower, albeit pointing higher, but has turned flat as Wednesday’s Asian session looms.
If USD/JPY rises above the September 12 daily high of 143.04, this could pave the way for a rally, exposing key resistance levels: the Senkou Span A at 143.15, followed by the Kijun-Sen at 144.48.
However, if USD/JPY falls below 142.00, a resumption of the downtrend will be exacerbated. The next support would be the yearly low of 139.58, followed by the 139.00 level.
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 fight 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.
