The USD/JPY pair continues its upward trend, recently reaching 156.75, marking its highest level since July 23, 2024. It is currently stabilizing around the 154.50 level. The pair has increased by 12% since the low of September 16, 2024, when it stood at 139.57, reaching the peak it hit just two days ago. Additionally, it has risen by approximately 10% since the beginning of the year.
Several factors are putting pressure on the Japanese yen:
- Widening Yield Gap Between Japanese and U.S. Government Bonds: For example, the 10-year Japanese government bond yield is around 1.069%, while the U.S. Treasury 10-year bond yield stands at approximately 4.408%. This creates a gap of around 3.339%, encouraging carry trade activities.
- Strength of the U.S. Dollar: Most U.S. economic data has surpassed analysts’ expectations, coupled with Donald Trump’s presidency, which has provided positive momentum for the dollar against most foreign currencies.
- Comments by Bank of Japan Governor, Kazuo Ueda: He has not hinted at the possibility of raising interest rates at the next Bank of Japan meeting in December, stating that any rate hike will depend on economic conditions and price levels.
Markets are awaiting Wednesday’s release of Japan’s export and import data. On Friday, Japan’s Consumer Price Index (CPI) will be published, along with the Purchasing Managers’ Index (PMI) for both Japan and the U.S., which will have a direct impact on the USD/JPY pair.
From a technical perspective, the upward trajectory of the USD/JPY seems dominant in the near term. The biggest challenge will be approaching the psychological barrier of 160.00, followed by the level of 161.95, which was recorded on July 3 of this year. On the support side, there are two important levels: the 20-day moving average at 153.45 and the 200-day moving average at 151.86. If the pivot point of 154.61 for the dollar against the yen is broken, the pair may target support levels at 153.87, 153.10, and 153.26. If the pivot point is surpassed, the pair may aim for resistance levels at 155.38, 156.12, and 156.89. The Relative Strength Index (RSI) is currently at 59, indicating strong bullish momentum for the USD/JPY pair.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
