The Japanese currency has attracted investors’ attention recently. Its decline to annual lows has raised a series of questions: What is pushing the Yen down?
The yen continues its bearish trend, almost reaching yearly lows. This is particularly evident in the exchange rate with the dollar, USD/JPY, which has reached 2022 highs. Various economic, financial, and geopolitical circumstances appear to have contributed to the further appreciation of the currency cross, which recorded growth of approximately 16% during 2023.
So what to expect from the performance of the currencies involved in this exchange?
What is happening with USD/JPY
On Thursday, the yen weakened further, reaching a new significant low, while the exchange rate against the dollar continues to gradually appreciate. This progressive rise in the exchange rate value of USD/JPY has suggested a possible intervention by the Japanese authorities in the currency market in order to stabilize the underlying levels of the market. Faced with this situation, the Minister of Finance of Japan, Shunichi Suzuki, stated that the relevant authorities are directly monitoring the situation, implicitly trying to discourage bearish speculation on the national currency.
Many people are speculating about a possible adjustment of the "Yield Curve Control (YCC) policy by the Bank of Japan (BOJ). Also aggravating the exchange rate situation is the dollar, represented by the DXY index, which has exceeded 106 points and is determined to test the year’s highs again. The dollar’s current appreciation is related to increased volatility in the bond market, with yields fluctuating greatly, significantly impacting the future outlook of stock traders.
In short, the situation is complex due to the contrast between Japanese monetary policy and the US monetary policy outlook, which still appear to hinder each other.
USD/JPY remains above the main psychological level
The USD/JPY currency exchange chart reflects a number of interesting technical backdrops. First of all, the ascending channel that has accompanied the price since the beginning of the year is evident. In the past, the lows, identified via the 14-period RSI indicator on a daily timeframe, have proven to be excellent restart areas, while the highs have been useful for identifying retracements in growth, following the principles of technical analysis.
The value of the exchange rate is once again close to 150, a key psychological threshold, which coincides with the highs recorded in the same period of the previous year, creating an interesting narrative in the growth of this currency cross. Currently, no technical signals of reversal emerge, keeping the underlying trend above the 200 period moving average.
For context, it is important to point out that JPY weakness is also evident in other currency exchanges involving currencies other than the dollar, such as EUR/JPY and GBP/JPY.
- USD/JPY 1D chart
- Source: Teletrader.com
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Original article published on Money.it Italy 2023-10-26 13:06:35. Original title: Yen in picchiata, cosa c’è dietro il declino della moneta giapponese
