The Japanese yen resumed its recent weakness on Thursday, plunging a further 4% against the US dollar. Of all the JPY currency pairs, the USD/JPY currency pair showed the most strength breaking out strongly above resistance levels at 143.45 and 143.84. As of late Thursday, the USD/JPY is at 144.36, up 0.92% on the day. Yen’s weakness is emphasized by the last bottom of 144.74, the weakest level since April 10.
Recent currency market volatility has raised a lot of eyebrows. They are keeping a bullish eye on USD/JPY as it eyes fresh resistance. The dollar to yen exchange rate is approaching the key technical resistance level of 144.48. This move raises eyebrows and leads to speculation over what might be next for the currency.
Yen’s Decline and Market Reaction
The Japanese yen came under immense pressure in line with the economic fundamentals, the shift in monetary policy and market sentiment. It was on Thursday that the currency began its spectacular crash. This depreciation marks the continuation of a larger depreciation trend we’ve experienced over the last several weeks. This dramatic drop can be pinned on many factors, including the rise and fall of interest rates and investor sentiment.
Market participants moved quickly to counter the yen’s slide. Not surprisingly, lots of traders rushed to reallocate, expecting even more volatility when it came to the USD/JPY pair and beyond. As its exchange rate’s uptrend persists in challenging important resistance levels, it will probably shape investor buying and selling conduct and market tone.
The noted support levels for the yen are at 142.81, and then 142.42. Traders should keep a real watchful eye on these levels by all means. One of the things they could decide is how the currency pair will move in the future. A break below these support levels would fade them in favor of more yen weakness.
Economic Influences on Currency Movement
A number of economic factors have played into the current situation of the Japanese yen. Take for example, the recent debate over Japan’s monetary policy which has left investors guessing. Just the speculation that this could mean a major shift in policy has already been enough to cause heightened volatility in the currency markets.
Further, crises like the global inflation rate and economic recovery trends have played a role in undermining investor confidence in the yen. As these conditions remain in flux, they could increase or negate the impact that these developments have had on the USD/JPY’s performance.
The Bank of Japan’s approach to managing inflation and growth forecasts will play a significant role in shaping future currency trends. Regardless of which path is taken, any change in policy would result in additional volatility in the exchange rate as traders react to new information.
Future Outlook for USD/JPY
As of the writing of this post, the USD/JPY is trading around 144.36. Market watchers are eagerly awaiting to see how the duo will respond at the fierce 144.48 resistance line. A breach of this magnitude would likely indicate the start of a new bullish trend for the dollar vs. the yen. Losing this momentum could lead to a breakdown and renewed demand for the yen as a haven currency.
Analysts are still split on their yen forecasts in the weeks ahead. Some economists are already cautioning that relentless pressure on the currency might lead to a ruble crisis. Especially so, if these economic conditions don’t otherwise improve. Some supporters argue that limited but strategic interventions by the Bank of Japan would be enough to stabilize the yen while it’s still possible.