USD/JPY Price Forecast: Slides to near 148.60 as Yen’s safe-haven demand improves
- USD/JPY falls further to near 148.60 as the Japanese Yen outperforms amid weakness in the US Dollar.
- The US Dollar faces pressure amid mounting US government shutdown risks.
- Investors await the key US data and the BoJ Summary of Opinions.
The USD/JPY pair extends its correction to near 148.60 during the European trading session on Monday, which it started on Friday after failing to gain further above the psychological level of 150.00.
The pair falls sharply as growing risks of the United States (US) government shutdown have weighed heavily on the US Dollar (USD), a scenario that has simultaneously increased the safe-haven demand of the Japanese Yen (JPY).
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | -0.27% | -0.49% | -0.03% | -0.20% | 0.10% | 0.08% | |
| EUR | 0.10% | -0.18% | -0.56% | 0.07% | -0.10% | 0.19% | 0.17% | |
| GBP | 0.27% | 0.18% | -0.26% | 0.25% | 0.02% | 0.37% | 0.35% | |
| JPY | 0.49% | 0.56% | 0.26% | 0.50% | 0.32% | 0.47% | 0.62% | |
| CAD | 0.03% | -0.07% | -0.25% | -0.50% | -0.14% | 0.12% | 0.10% | |
| AUD | 0.20% | 0.10% | -0.02% | -0.32% | 0.14% | 0.30% | 0.29% | |
| NZD | -0.10% | -0.19% | -0.37% | -0.47% | -0.12% | -0.30% | 0.13% | |
| CHF | -0.08% | -0.17% | -0.35% | -0.62% | -0.10% | -0.29% | -0.13% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
US government shutdown risks have increased as Democrats deny supporting Republicans over approving the short-term funding bill in the House of Senate.
Meanwhile, investors await a slew of US official labor market and Purchasing Managers’ Index (PMI) data releases this week. Market participants will pay close attention to employment data to get cues about the current status of the job market. This month, the Federal Reserve (Fed) started unwinding monetary policy restrictiveness to support deteriorating labor market conditions.
In Japan, investors will focus on the Bank of Japan (BoJ) Summary of Opinions (SOP), which will be published on Tuesday.
USD/JPY trades inside the Ascending Triangle formation, which indicates indecisiveness among investors. The horizontal resistance of the above-mentioned chart pattern is placed from the March 28 high around 151.20, while the upward-sloping border is plotted from the April 22 low of 139.90.
The 20-day Exponential Moving Average (EMA) trades flat around 148.10, indicating a sideways trend.
Meanwhile, the 14-day Relative Strength Index (RSI) falls back inside the 40.00-60.00 range after failing to sustain above 60.00, suggesting that consolidated performance is expected in the near term.
The pair would see more upside to near the February 19 high of 152.30 and the February 13 high of 154.68 if it breaks above the March 28 high of 151.20.
On the flip side, a reversal move by the pair below the September 17 low of 145.50 would pave the way for more downside towards the July 7 low at 144.22, followed by the July 3 low of 143.45.
USD/JPY daily chart
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US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
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