The Japanese yen is in trouble as the US dollar index rally continues. The USD/JPY price continued rising and reached a high of 144 on Wednesday. This performance means that the Japanese yen has lost about 90% of its value since 2012 and by 42% from the lowest point in 2021.
The USD/JPY has been in a strong bullish trend in the past few months as the divergence between the Federal Reserve and the Bank of Japan continued. Data published recently by the US point to a situation where the Fed will continue hiking interest rates in the coming months. For example, data published on Friday showed that the economy continued adding jobs in August.
On the other hand, data from Japan showed that the economy is in trouble. On Tuesday, data revealed that average cash earnings dropped from 2.0% in June to 1.8% in July. In the same period, household spending dropped from 1.5% to -1.4%. On a YoY basis, household spending rose by just 3.4%. Overtime pay also pulled back.
Therefore, the USD to JPY exchange rate has jumped because of the BoJ reluctance to hike interest rates. The bank believes that the current inflation trend is supply-driven and that rates will not help to ease it. As such, it has maintained low-interest rates and continued with its quantitative easing policies.
The four-hour chart shows that the USD/JPY price has been in a strong bullish trend in the past few months. It managed to cross the important resistance level at 139.29, which was the highest point in July this year. The pair has also moved above the second resistance of the standard pivot points and the 25-day and 50-day moving averages.
Therefore, the USD to JPY exchange rate will likely keep rising as buyers target the next key resistance at 145. A drop below the support at 142.80 will invalidate the bullish view.
This post was last modified on Sep 07, 2022, 07:33 BST 07:33