TTTUSD/JPY currency pair opened with an immediate bearish gap, as market reacted on the result of Japan’s latest upper house election. The result has spurred worries over the future of the ruling coalition’s joint control over Japan’s government. It can result in greater national debt, producing a bearish bias for the pair. In the early part of the European session USD/JPY remained under the key 148.00 level. This indicates that it is unable to build much upward momentum.
This overly pessimistic outlook is confirmed by a number of technical indicators. A firm intraday break below the 100-hour Simple Moving Average (SMA) would open up the possibility for USD/JPY to continue its descent. Furthering this view, negative oscillators on the 1-hour chart support this outlook, suggesting more bearish action ahead in the short term. In addition to these levels, the 100-day simple moving average is now sitting in the vicinity of the 146.55 region. If it does get broken, USD/JPY could see even sharper downside.
Major resistance levels ahead also pose a serious challenge for any upward climb. Key resistance further upside meaningfully past the 148.00 key psychological level faces potential resistance around the daily swing high, just above the 148.65 area. That said, environmental analysts are closely watching. In the event that USD/JPY climbs above this level, it might trigger a new push to retest the 149.00 big figure again, potentially supported by stronger bullish momentum.
Challenges persist for the currency pair. If the strength continues holding above 149.00, it may lead to a breakout beyond the 149.15-149.20 area. This increase could bring USD/JPY within striking distance of the key psychological barrier of 150.00. The assumption that these opportunities will translate into real change is challenged by the current economic climate.
Japan’s slowing economic growth, declining real wages, and signs of cooling inflation provide a backdrop that may influence the Bank of Japan’s (BoJ) interest rate decisions in the near future. In the wake of those elections, we’re now hearing big worries about fiscal policy. One concern is that the level of national debt may significantly constrain future monetary policy. The ruling Liberal Democratic Party (LDP) and its junior partner Komeito’s failure to win a majority in the House of Councillors. This hard-fought, highly competitive election lit a fire under fears over their political fate.
On the other end of the Pacific, dollar developments in the U.S. are continuing to influence currency movements. Yet earlier in July, the University of Michigan’s US Consumer Sentiment Index jumped unexpectedly to 61.8. This is an increase to counter USD losses that go deeper and further USD/USDJPY support. Indeed, US Federal Reserve Chair Jerome Powell has cautioned that higher inflation is inevitable this summer due to increased US tariffs. As with so much these days, this latest development has considerably complicated the picture.
Against this backdrop, alarm over possible economic damage from US tariff hikes is mounting. These concerns will almost certainly preclude any major advances for the Japanese yen. The relationship between U.S. economic data and Japan’s political events presents a difficult reality for USD/JPY traders.
In the foreign exchange (FX) market, analysts are following the USD/JPY cross very closely. Further downside is seen as an even better buying opportunity, most notably as it approaches last week’s swing low in the 147.00-146.90 area. This means there’s a level of support that traders are deeply focused on.