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USD/JPY - Make or Break

Yesterday, the US Market was closed due to celebrations for Juneteenth, therefore there were no major new developments confirmed. Simultaneously we had no economic releases from Japan, so why is the USD/JPY considered to be of such high importance today and this week?

The USD/JPY is being closely monitored by the market mainly for technical reasons. The price has reached a major significant price level, catching the market’s attention. Currently, the price is hovering at a price high which has not been experienced since the late 1990s.

The currency pair reached 135.54 last Wednesday before falling into a 30-hour downwards trend, which also broke below previous lows. However, the downward price movement lost momentum and the price has since managed to correct back upwards to the previous high. Traders are looking closely to see if the exchange rate will be able to break above the price and continue moving upwards or if the trend will fail.

USDJPY - 21.06.2022.jpg

Yesterday, there was little within the market for traders to analyze as the market was closed. However, both the US Treasury and President attempted to calm the markets regarding a potential recession. Janet Yellen advised that the country could potentially avoid a recession since the strong labor market supports the American economy. Although its growth may slow down significantly due to "unacceptably high" inflation, it does not necessarily mean that the economy will fall into recession. The US President made a similar speech.

Cleveland Fed Chief Loretta Mester also advised that it would take up to two years for inflation to decline to the Fed's target of 2.0%, adding that a gradual slowdown in price growth would begin from current levels. Other officials also advised that the unemployment rate will have to rise in order for inflation to fall.

On the other side of the ocean, the governor of the Bank of Japan, Mr Kuroda, said yesterday that the regulator and the country's government are closely cooperating in influencing the foreign exchange market. He repeated that a sharp movement in the national currency's exchange rate is seen as undesirable, and, on the contrary, a stable movement of the Yen is very important. This confirmation was also made last week but it doesn't appear to have made a long lasting effect on the exchange rate.

The market will be closely monitoring the actions which will follow coming from both the BOJ and the central government. Decisive action is predicted to be taken but how successful it would be in stabilizing the Yen is not yet known.

When looking at both the Yen Index and the US Dollar Index, we can see that there is currently little volatility in the market this morning so far. Today, both indexes are at their neutral level and there are no major current losses or gains. The Yen Index has declined over the past 3 days but the price remains above previous lows.

The market will be looking forward to the Bank of Japan’s Minutes Meeting which is scheduled to be released tomorrow morning. This will provide in-depth details regarding the bank’s latest meeting and discussion. In addition to this the market is awaiting the release of the US Home Sales figure this afternoon and the Fed’s Testimony tomorrow and Thursday.

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