- High US yields and dovish Prime Minister's comments support USD/JPY, which has broken through a key resistance level and is trading at 149.31.
- The Relative Strength Index (RSI) suggests further upside potential, with August 15 highs of 149.39 and 150.00 as the next targets.
- Key support lies at 147.35, with sellers looking to push the pair below the Ichimoku cloud at 146.40-60 and the Tenka line at 145.50.
USD/JPY rebounded on the back of higher US Treasury yields due to its close positive correlation with USD/JPY, rising above 149.00 for the first time since mid-August. This, along with dovish comments from Prime Minister-elect Ishiba, helped push the pair higher, currently trading at 149.31.
USD/JPY Price Prediction: Technical Outlook
USD/JPY is neutral to upwardly biased after clearing key resistance levels such as the 50-day moving average (DMA) and entering the Ichimoku cloud (Kumo).
Momentum suggests that buyers remain in control via the Relative Strength Index (RSI). It must be said that the RSI is still far from overbought and this indicates that the RSI may rise further.
If USD/JPY continues to rise above the August 15 high of 149.39, the 150.00 number will be exposed. If stronger, the pair could challenge the 200-DMA at 151.39.
Meanwhile, sellers need to push USD/JPY below the latest cycle low (October 8 low of 147.35) on the daily chart. Above this, the pair could challenge the bottom of the clouds at 146.40-60, above Tenkasen at 145.50.
USD/JPY price movement – daily chart
Frequently asked questions about the Japanese Yen
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by trends in Japan's economy, but more specifically by factors such as the Bank of Japan's policies, the difference in Japanese and U.S. bond yields, and traders' risk sentiment.
One of the Bank of Japan's missions is exchange control, so its trends are key to the yen. The Bank of Japan occasionally intervenes directly in currency markets, generally to devalue the yen, but does not do so frequently due to political concerns in major trading partners. The Bank of Japan's ultra-easy policy from 2013 to 2024 widened the policy divergence between the Bank of Japan and other major central banks, causing the yen to weaken against major currencies. Recently, the gradual easing of this ultra-easy policy has provided some support to the yen.
Over the past decade, the Bank of Japan's commitment to ultra-easy monetary policy has widened its policy divergence from that of other central banks, particularly the US Federal Reserve. This confirmed the widening gap between US 10-year bonds and Japan's 10-year bonds, which favored the US dollar against the Japanese yen. The gap is narrowing with the Bank of Japan's decision to gradually abandon its ultra-easy policy in 2024, coupled with interest rate cuts by other major central banks.
The Japanese Yen is often considered a safe investment. This means that when markets are under stress, investors are more likely to put money into the Japanese currency, which is expected to be reliable and stable. Times of turmoil are likely to increase the value of the yen against other currencies that are considered riskier investments.
