USD/JPY Daily Price Analysis – Yen Weakness Persists

Japan’s ultra-loose monetary policy, despite slight changes, remains accommodative and continues to drive long-term yen weakness.

Key Points

• USD/JPY rises to 150.863, nearing 1995 levels.
• BoJ’s bond purchases through 2026 maintain yen pressure.
• Yen’s July rally fades, with further declines expected.

USD/JPY Daily Price Analysis – 22/10/2024

The USD/JPY pair continues its upward momentum, reaching a current level of 150.863 after opening at 150.794, with a modest change of +0.03%. This follows Monday’s close of 150.822, showing the pair’s steady performance as it nears historic levels last seen in 1995 when the yen’s trade-weighted value stood at 150.76.

Long-Term Yen Weakness and Policy Drivers

The yen’s historical depreciation highlights a long-term trend of weakness, exacerbated by Japan’s ultra-loose monetary policy. In 1995, before the Bank of Japan adopted its accommodative stance, the yen was much stronger. Since then, it has plummeted, with this year’s trade-weighted value reaching an all-time low of 53.06. Although there has been a slight recovery to 57.38 since July, this movement pales in comparison to the larger structural decline driven by fundamental forces.

Japan’s central bank has remained one of the most dovish in the developed world. While recent policy tweaks, including reduced bond purchases, have been interpreted as the beginning of normalization, the path ahead remains gradual. 

The BoJ’s plan to continue bond purchases until at least 2026 suggests that while there is an intention to tighten, the accommodative stance remains largely intact. This dovish outlook, combined with a forecasted rise in interest rates to only 0.6% by the end of next year, keeps Japan as one of the lowest-rate environments globally. As a result, the yen’s attractiveness as a funding currency for carry trades remains strong, particularly as other central banks maintain higher rates.

Impact of Recent Interventions and Policy Shifts

The yen briefly rallied in July following central bank interventions and minor policy changes, which disrupted yen-funded carry trades. Traders shifted from betting on further yen depreciation to speculating on its potential rise. However, this rally proved short-lived, as technical and fundamental factors supporting the yen’s drop resumed. 

With fewer speculative positions weighing on the yen, further downside appears likely, especially as there is currently no strong market expectation of another BoJ intervention. This leaves the currency more vulnerable to a sharper decline in the near term.

Key Economic Data and News to Be Released Today

There are no major economic data releases or events scheduled for today that are likely to significantly impact the USD/JPY pair. Traders will likely continue focusing on global interest rate dynamics, particularly the ongoing divergence between U.S. and Japanese monetary policies, which is the key driver behind USD/JPY’s upward trajectory.

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USD/JPY Technical Analysis – 22/10/2024

All technical indications point to a bullish USD/JPY price delivery today. For instance, the pair crossed over the 200 EMA yesterday and has continued to soar above the moving average ever since.

While we may expect a little bit of consolidation around the current resistance level, we may see USD/JPY explode to the upside, testing an even higher resistance level at 152.064. Alternatively, while still maintaining a bullish bias. Price may pull back to the 200 EMA before making its bullish shots. Either way, short-term buyers should sit tight.

USD/JPY Fibonacci Key Price Levels 22/10/2024

Short-term traders planning to invest in USD/JPY today should keep a close eye on the following key price levels for the day: