Recently, the Japanese yen has been on the rise, with the USD/JPY pair hitting a three-week low at 143.99. This movement can be attributed to a variety of factors including the weakening of the US dollar and significant statements made by the Bank of Japan (BOJ) and the US Federal Reserve.
The Governor of the Bank of Japan, Kazuo Ueda, made hawkish comments last week which caught the attention of the market. Ueda hinted at the possibility of adjusting the BOJ’s monetary policy in line with economic trends. This statement led to speculation about a potential interest rate hike, especially considering Japan’s core consumer price index rose to 2.7% in July.
Conversely, the Chair of the US Federal Reserve, Jerome Powell, took a more dovish stance, mentioning the need to reevaluate US monetary policy due to growing risks in the labour market. This suggests that the Fed could start easing monetary policy as soon as September, contrasting sharply with the potential tightening in Japan. These differing monetary policy outlooks have significantly influenced forecasts for the USD/JPY pair.
Technical Analysis of USD/JPY
The USD/JPY pair has recently consolidated around the 146.70 level before dropping to 143.50. While there may be a short-term increase to 144.55, a further decline to 142.88 is possible. The MACD indicator supports this bearish trend, with its signal line below zero and trending downwards. The pair has formed a downward structure to 143.44, and a corrective move towards 144.55 could happen, possibly extending to 145.70 before dropping to 142.88. The Stochastic oscillator, currently above 50, indicates a potential rise to 80 before the next downward movement.
Summary
The USD/JPY pair is currently facing downward pressure due to the weakening US dollar and potential adjustments in monetary policy by the BOJ. As central banks continue to adjust their policies and economic indicators evolve, the yen could experience further strengthening if the BOJ adopts a tighter monetary stance in response to rising inflation.