USD/JPY Forecast: USD to JPY Exchange Rate to Crash to 130
The USD/JPY price crashed to the lowest level since June 16th of this year as the US dollar lost its momentum. The USD to JPY exchange rate has crashed by more than 5% from its highest level this week.
US dollar loses momentum
The USD/JPY price crashed to the lowest point in almost two months as concerns about the Federal Reserve continues.
Last week, the Federal Reserve delivered an extremely hawkish decision by hiking interest rates by 0.75%. It has hiked rates by 225 basis points year-to-date.
Therefore, the dollar has retreated since investors expect that the bank will have a difficult time hiking interest rates in the coming months.
First, there are signs that inflation has peaked. For example, recent data shows that the average gas price has dropped to about $4.33. This is a significant decline from the year-to-date high of $5.
Second, companies like Walmart and Target have warned about their rising inventories. As a result, they have hinted that they will start offering discounts.
Third, the cost of ocean shipping has started falling as global demand eases. Most importantly, the American economy has moved to a technical recession. Historically, it has been a bit difficult to hike interest rates during a recession.
Therefore, the performance of the US/JPY is mostly because of the weaker US dollar. Indeed, the dollar index has crashed from a high of $109.30 to less than $105.
This performance will likely push the Bank of Japan (BoJ) to hold steady on rate hikes. Data published on Friday showed that inflation in Tokyo rose to 2.5%, which was the highest it has been in more than a decade.
Turning to the two-hour chart, the USD to JPY exchange rate continued dropping on Monday as the dollar crash continued. It managed to move below the ascending trendline shown in purple. It sits below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has continued falling. Therefore, the USD/JPY pair will likely continue falling as sellers target the key support at 130.