The Japanese Yen (JPY) is under pressure as it sees little chance for improvement during the Asian trading session Thursday. Almost every market participant has his or her eyes on the USD/JPY currency pair right now. This concern is partly due to economic uncertainties linked to a potential US government shutdown and an Oct. 31 revelation of the next Bank of Japan (BoJ) monetary policy. Traders have been looking for guidance from BoJ Governor Kazuo Ueda. These insights might provide a good deal of clarity about the central bank’s path ahead.
And the USD/JPY pair looks to be establishing a base, recovering from a five-week low hit just over one week ago in the mid-151.00s area. Yet, even in the face of this recovery, the market remains deeply concerned about the stability of US financial policies. These worries have deep implications for international currency markets. The duo has run into short-term resistance at the 153.00 handle. Their next major test lies in the 153.25 to 153.30 area.
Indeed, the chief factor behind the recent volatility in USD/JPY is clear confluence of domestic and international elements, analysts argue. The threat of a US government shutdown presents unprecedented risks that will only weigh down economic performance and investor confidence. Traders are meticulously watching the next BoJ policy meeting. They are all anticipating looking for clues to a future rate increase in December or early next year.
US Treasury Secretary Janet Yellen has urged Japan’s government to grant the BoJ the necessary latitude to mitigate excessive exchange rate volatility. Now the US is ramping up the pressure on Japan. They have even begun to call on Japan to engage in monetary policy retraction sooner in response to shifting economic fortunes. How these pressures play out will be a big determinant of JPY direction in the weeks ahead.
Given all these challenges, the Japanese Yen still managed to claw higher during Thursday’s Asian session. Most traders are still wary, as they look ahead to more news on the BoJ’s direction with interest rates. The market had been awaiting hints on Ueda’s views. They are looking to him to signal a turn toward tighter policy that would potentially begin a new tightening cycle.
In JPY terms, the world has been a little more forgiving. Its climb appears capped as market participants await further direction from the central bank. A compelling break lower would put further YEN’s Achilles heels at risk. Additional declines are likely if the USD/JPY can close below the 151.55 to 151.50 area. Such a move would be enough to send it crashing all the way back to 151.10-00 important support.
Should the USD/JPY pair clear the specified short-term resistances, it would probably extend its upswing. We might find it getting up to mid-154.00s and perhaps a little higher. Targets are the 154.75 to 154.80 area and the psychologically important 155.00 level. If they do come to fruition, these possible shifts underscore the precarious interplay between home-grown economic influences and outside forces that threaten to dog both currencies.
Apart from these structural change drivers, spillover effects from geopolitical dynamics strongly affect market sentiment. Notably, US President Donald Trump is scheduled to meet with Chinese leader Xi Jinping after months of trade tensions between their countries. What happens in this one meeting could set the stage for dangerous global economic conditions and, as a result, currency valuations, including the increasingly weak JPY.