The Yen has fallen to 134.56, a 20-year low, and a breakout would be the lowest since October 1998. On January 31, 2002, it was nearing 135.20. It’s now trading at 143.72 per euro, its lowest level in 7.5 years. Higher global interest rates are holding down the Yen, while the Bank of Japan (BoJ) continues its stimulus programs to diminish Japan’s current account surplus.
Thursday’s failure of the US Dollar Index (USDIndex) to maintain above 102.60 is likely to keep the USDJPY pair bearish in the near term. During this period of positive market sentiment, the USDIndex is less attractive. In contrast to the previous two trading sessions, the USDIndex remained in a consolidation phase following a decline near the 103.00 round resistance level.
The BoJ has expressed concern over the weak Japanese Yen on the Tokyo side. Japan’s CPI has risen recently due to a rise in the price of fossil fuels, which has contributed to Japan’s inflation rate reaching its 2% target. A Bloomberg survey found that 74% of Japanese corporate executives feel a weak Yen hurts the country’s economy. More than 30% of respondents say the Yen has hurt earnings, while 26% say it has boosted earnings. 197 executives responded to the survey conducted between May 23 and June 1.
Almost 81% of respondents expect the USDJPY rate to stay below 135 by the end of the year. The decline of the Yen has various negative effects, including depreciating Japanese companies, widening the country’s trade deficit, and increasing import costs for households, although the head of the Bank of Japan, Haruhiko Kuroda, has said many times that a weaker Yen is good for the economy as a whole.
Technicals
After rallying to 134.5, the USDJPY pullbacked to the previous day’s value range, i.e. 133 – 134.60. The immediate Support area is 133.24, whereas the Resistance area is 134.48. On the H1 time frame, it’s a clear case of rejection of higher prices from a single print of almost 5.8 pips. A lower low of 133.38 was formed after a low of 133.58. This may allow room for a test of 133.20 and if broken, may go for a test of the previous three day high of 132.86. On the flip side, a break of 134 and the VPOC area from yesterday may lead the pair to 134.40.
Click here to access our Economic Calendar
Adnan Rehman
Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
