- The Japanese yen is experiencing a significant decline in performance against the US dollar.
- Economists are anticipating a moderate annual increase of 2.5% in the Tokyo CPI Ex. Fresh food for August.
- The US dollar remains stable, as Federal Reserve Governor Lisa Cook prepares to file a lawsuit to contest her firing.
During the late Asian trading session on Wednesday, the USD/JPY pair is trading about 0.4% higher, nearing 148.00. This rise occurs as the Japanese yen lags behind other currencies. There’s a notable uncertainty regarding the upcoming Tokyo Consumer Price Index (CPI) data, expected to be released on Friday.
Investors are closely watching the Tokyo CPI data, which may impact the expectations surrounding the Bank of Japan (BOJ) monetary policy. The anticipated growth rate of 2.5% is below last month’s figure of 2.9%, suggesting a possible easing in price pressures. This might lead traders to reassess their expectations for interest rate hikes by the BOJ this year.
Meanwhile, the US dollar is maintaining a steadier course. Governor Cook’s lawsuit against President Trump’s decision to dismiss her is seen as raising questions about the independence of the Federal Reserve. “It’s not just about the Fed’s integrity; it seems more about Trump wanting to place his own people in influential roles,” noted an analyst at Capital.com.
The USD/JPY is forming an upward triangle, which indicates a contraction in volatility. The upper boundary of this pattern is established from its lowest point of 139.40 on April 22, while the horizontal resistance is marked from a high of 151.20 on March 28.
The asset seeks to surpass the 200-day exponential moving average (EMA), currently around 147.90.
The 14-day relative strength index (RSI) indicates a sideways trend, oscillating between 40.00 and 60.00.
If the pair rises above the high of 148.78 from August 22, it could reach the important psychological barrier of 150.00 and potentially hit the earlier high of 151.20 from March 28.
On the flip side, if the pair drops below 145.85 from July 24, it may test the levels of 144.22 from July 7 and 143.45 from July 3.
USD/JPY Daily Chart
US Dollar FAQ
The US dollar (USD) is the official currency of the U.S. and is widely used in many other countries. It represents more than 88% of global forex trades, averaging around $6.6 trillion a day. The dollar became the primary global reserve currency after World War II, transitioning away from the gold standard post-1971.
The primary factor impacting the dollar’s value is the monetary policy of the Federal Reserve. The Fed’s focus is on price stability and full employment, mainly using interest rate adjustments to achieve these goals. When inflation spikes beyond 2%, rates are likely to increase, thereby boosting the dollar’s value.
In extreme cases, the Fed may resort to quantitative easing (QE), which involves increasing the money supply to stimulate the economy, typically resulting in a weaker dollar.
Conversely, quantitative tightening (QT) occurs when the Fed halts bond purchases, usually positively affecting the dollar’s valuation.
