USD/JPY forecast: no end in sight for the Japanese yen crash

on Apr 12, 2024
  • The Japanese yen continued its strong plunge this week.
  • The US published strong jobs and inflation numbers.
  • Traders are focusing on the next intervention measures in Japan.

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The USD/JPY exchange rate continued its remarkable surge this week as signs of more Federal Reserve tightening continued. The pair continued soaring, reaching a 34-year high of 153.18. Similarly, the GBP/JPY pair soared to 193 while the EUR/JPY soared to 165.

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Japanese yen crash continues

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The Japanese yen continued falling this week after a series of strong American US economic data. 

On Friday, a report by the BLS showed that the American economy continued adding thousands of jobs in March. It added over 303k jobs in March as the unemployment rate retreated to 3.8%.

The headline Consumer Price Index (CPI) jumped from 3.2% to 3.5% in March, its highest point in months. Core inflation rose by 3.8%, almost double the Federal Reserve target of 2.0%.

A separate report on Thursday revealed that the core Producer Price Index (PPI) rose from 2.1% in February to 2.4% in March. The headline PPI rose to 2.1%.

Therefore, the US dollar index jumped to $104.50 as investors predicted that the Fed would start hiking interest rates later this year. Alternatively, the bank will likely hold rates steady for longer than expected.

The general view is that the spread between the US and Japan’s interest rates will likely continue to widen. US rates are between 5.25% and 5.50% while those in Japan stand at 0.0%.

In this case, the only hope for the Japanese yen is if the government intervenes in the forex market. In a statement on Thursday, the government said that it was not ruling out any option when it comes to interventions. 

These interventions could resemble what happened in 2022 when the government pumped $60 billion to prop up the currency. While the Japanese yen reacted positively to these interventions, the impact was short-lived as the USD/JPY surged to a high of 151.94 in October 2022.

USD/JPY technical analysis

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USDJPY chart by TradingView

The USD to JPY exchange rate continued rising this week as the dollar index jumped. It rose above the crucial resistance point at 151.94, its highest swing in October 2022 and November 2023. This price was also the upper side of the ascending triangle pattern.

The pair has moved above the 50-day Exponential Moving Average (EMA) while the Awesome Oscillator has moved above the neutral point. The Relative Strength Index (RSI) has moved above the overbought level. Therefore, the outlook for the pair is bullish, with the next point to watch being at 155. A drop below the support at 151 will invalidate the bullish view.

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