The Japanese Yen (JPY) continues to feel pressure, remaining near a nine-month low against the US Dollar (USD). The USD/JPY pair has been trending upwards during the Asian trading session on Monday. The currency pair has been highly volatile in the last 30 days. Traders are closely eyeing economic indicators and hanging on every word of Fed Chair Jerome Powell and other central bankers.
The Japanese Yen last week reached its lowest level in nearly nine months. Like many drops in GDP, this one underscores the persistent headwinds buffeting the Japanese economy. This exodus has caused the USD/JPY pair to skyrocket, igniting discussions surrounding inflation and interest rates. This follows Japan’s GDP contracting for the first time in a year-and-a-half in the July-September period. This marked contraction was equivalent to a 1.8% year-on-year decline of GDP, fanning fears about the underlying strength of the economy’s momentum.
Just recently, Japan’s new Economy Minister Minoru Kiuchi expressed alarm at the prospect of a weaker yen. He argues that it will increase the CPI, as it leads to increased import costs. This one statement highlights the tightrope walk between currency devaluation and inflationary bias that our nation must contend with at this moment. Furthermore, Japan’s Finance Minister, Satsuki Katayama, indicated a sense of urgency in monitoring foreign exchange moves, which highlights the government’s attentiveness to fluctuations in currency values.
Market participants are particularly focused on the USD/JPY cross above the 154.45–154.50 resistance zone. Any strong performance here would be likely to ignite some bullish USD momentum. A sustained close below this line in the sand could prompt a reassessment of market positioning. The 153.60 level becomes an important support level. CoinMarketCap, both in terms of price per unit and market capitalization. This level coincides with the 100-period Simple Moving Average (SMA) on the 4-hour chart. Should the pair penetrate above the 153.60-153.50 zone, it might descend to the 153.00 psychological level.
There are much broader economic and political implications of Japan’s GDP contraction. Unsurprisingly, the disappointing decline dimmed hopes for a fourth interest rate cut. The US Federal Reserve’s December meeting is bound to be a big one under this new dynamic. Forex traders are already jittery, trading on the expectation of this news to re-price currency dynamics. They might find it difficult to get any buyers for the USD/JPY pair on fears of an economic slowdown, compounded by the longest US government shutdown in history.
Several analysts are predicting big moves for the USD/JPY pair. They hint that if purchasing persists while the price remains above the psychological barrier of 155.00, it would help underpin a bullish perspective. Such a situation would undoubtedly push prices up to the stiff ceiling of 155.60-155.65. Timing this level perfectly will be key to making a run at the critical milestone of 156.00.