- USD/JPY represents part of the intraday loss as the US dollar strives to gain temporary status.
- The US dollar remains weak due to multiple headwinds.
- BOJ is expected to continue to raise interest rates.
The USD/JPY pair recovers some of the intraday losses, but still trades at nearly 140.65 during North American trading hours on Tuesday. The asset has shown sharp negative side movements over the past two weeks, revisiting its 21-month low of nearly 139.60.
The pair remains weak as US President Donald Trump’s announcement of tariffs before and after and after by Federal Reserve Chairman Jerome Powell attenuated the reliability of the US dollar.
The US Dollar Index (DXY), which tracks the value of greenbacks for six major currencies during North American trading hours, attracts several bids and rebounds to near 98.50, but is still close to the three-year low of 98.00.
Meanwhile, the Japanese Yen (JPY) worked strong as it improved the appeal of a safe haven, as it was safe due to the lack of clarity on Trump’s tariffs.
Furthermore, solid expectations that the Bank of Japan (BOJ) will raise interest rates again this year have also strengthened the yen. The BOJ is expected to continue to help raise interest rates, a report from Reuters shows. The agency reported that higher risks from top US tariffs will not derail the cycle of wage increases and inflation, which are deemed important to keep interest rates up.
USD/JPY trades at make or breakpoints near a psychological level of 140.00. The pair’s outlook is very bearish as the 20-day exponential moving average (EMA) tilts downwards.
The 14-day relative strength index (RSI) oscillates in the bearish range of 20.00-40.00, indicating strong negative side momentum.
The assets face more negative aspects towards the lowest of 138.00 on July 28, 2023 and the lowest of 137.25 on July 14, 2023, after falling below the lowest of 139.58 on September 16th.
On the other hand, a recovery move above the high of 142.15 on April 21, driving assets towards a high of 143.28 on April 16, followed by a low of 144.00 on April 9.
USD/JPY Daily Chart
Japanese Yen Questions
Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is widely determined by the performance of the Japanese economy, but more specifically, by the Bank of Japan’s policies, the difference in bond yields between Japan and the US, or the risk of sentiment among traders among other factors.
One of the Bank of Japan’s obligations is currency control, so that movement is key to the yen. BOJ has generally stepped in directly into the currency market to reduce the value of the yen, but it refrains from doing it frequently due to political concerns from its major trading partners. The BOJ Ultra Loose Monetary Policy from 2013 to 2024 saw an increase in policy differences between the Bank of Japan and other major central banks, and the yen was depreciated from its major currencies. More recently, the yen has given some support in the gradually rewind of this ultra-loose policy.
Over the past decade, BOJ’s stance on sticking to ultra-loose monetary policy has widened policy differences with other central banks, particularly the US Federal Reserve. This supported the widening gap between US and Japanese bonds in 2010, and the US dollar against the Japanese yen. The 2024 BOJ’s decision, coupled with interest cuts from other major central banks, is narrowing this gap.
Japanese yen is often considered a safe home investment. This means that in an age of market stress, investors are likely to spend money on Japanese currency for its reliability and stability. An era of turbulence could strengthen the value of the yen to other currencies where investment is considered more risky.
