During Thursday's Asian trading session, the USD/JPY pair remained stable around 158.50. The Japanese Yen (JPY) made a decent recovery, but this was counterbalanced by a strong US Dollar (USD), leading to the currency pair's consolidation.
Japanese Yen Performance Today
In terms of the Japanese Yen's performance against major currencies, it showed the most strength against the New Zealand Dollar. Below is a heat map illustrating the percentage changes of the Japanese Yen against other major currencies. For example, the JPY strengthened by 0.05% against the USD.
| Base | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | 0.05% | 0.05% | -0.05% | 0.10% | 0.19% | 0.23% | 0.03% | |
| EUR | -0.05% | -0.00% | -0.11% | 0.05% | 0.13% | 0.18% | -0.02% | |
| GBP | -0.05% | 0.00% | -0.11% | 0.05% | 0.14% | 0.18% | -0.02% | |
| JPY | 0.05% | 0.11% | 0.11% | 0.13% | 0.23% | 0.25% | 0.08% | |
| CAD | -0.10% | -0.05% | -0.05% | -0.13% | 0.10% | 0.13% | -0.06% | |
| AUD | -0.19% | -0.13% | -0.14% | -0.23% | -0.10% | 0.05% | -0.15% | |
| NZD | -0.23% | -0.18% | -0.18% | -0.25% | -0.13% | -0.05% | -0.20% | |
| CHF | -0.03% | 0.02% | 0.02% | -0.08% | 0.06% | 0.15% | 0.20% |
The Japanese Yen recently gained ground after a period of weakness, spurred by concerns over potential market intervention. Japan's Chief Cabinet Secretary Seiji Kihara indicated on Wednesday that the government might step in if the Yen continues to experience one-sided movements.
However, the Yen's recovery might face limitations due to Prime Minister Sanae Takaichi's ongoing trade focus. Takaichi is anticipated to announce an early election next week after dissolving the lower house of parliament, as reported by Reuters. Her expected victory would align with her budget plans that propose increased spending, boosting Japanese equities but potentially restraining the Yen.
Meanwhile, the US Dollar Index (DXY) remains robust, nearing its monthly high of 99.26, amid predictions that the Federal Reserve will maintain current interest rates in their upcoming policy meeting.
Technical Analysis of USD/JPY
At the time of reporting, USD/JPY is trading almost flat at approximately 158.56. The pair is well above the ascending 10-week Exponential Moving Average (EMA), indicating a strong upward trend. The 10-week EMA's upward trajectory supports any dips and maintains upward pressure.
The 14-week Relative Strength Index (RSI) stands at 69.37, suggesting strong momentum but nearing overbought levels. The initial support is seen at the 10-week EMA of 156.28. While the pair stays above this trend EMA, the uptrend could continue, with any pullbacks likely cushioned by dynamic support. A minor retreat could relieve the RSI from overbought conditions and sustain the broader trend. A weekly close below 156.28 might weaken the bullish outlook, allowing for a more significant retracement.
Factors Influencing the Japanese Yen
The Japanese Yen is one of the most traded currencies globally, influenced by various factors, including Japan's economic performance and the Bank of Japan's policies. The differential between Japanese and US bond yields and overall risk sentiment among traders also play a crucial role.
The Bank of Japan (BoJ) impacts the Yen significantly through its monetary policy, which historically involved keeping the Yen's value low. However, the BoJ's recent steps to unwind its ultra-loose policy have lent some support to the Yen.
The gap between Japanese and US bond yields has traditionally favored the USD over the Yen due to the BoJ's lenient monetary stance. Yet, recent policy shifts in Japan and interest-rate cuts in other major economies are narrowing this gap.
As a safe-haven currency, the Yen tends to appreciate during periods of market uncertainty, as investors seek stability in volatile times.