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USD/JPY Targets 2022 High on Surging Dollar

USD/JPY Targets 2022 High on Surging Dollar

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USD/JPY has kicked off the week in the same form it finished the week just gone. The dollar is on track to finish higher against the Yen for the fifth consecutive trading day.

At the time of writing, USD/JPY is marginally higher at 137.06 (+0.20 percent), an increase of 5.2 percent over the last three weeks. The dollar’s recent strength has lifted it to within touching distance of the 24-year high against the yen, set in July.

At the current level, the Japanese currency has depreciated by almost 20 percent against the dollar since the start of the year. Although, most Asian currencies have performed poorly against the greenback in 2022, the yen is among the worst.

As we reported last week, the weak yen is contributing to Japan’s ongoing trade deficit. Last week, Japan’s trade deficit for July widened to -$1.4368 billion from -1.398 in June. This was the eleventh consecutive month that imports have outweighed exports.

Furthermore, despite the weaker yen encouraging companies to send money to Japan to pay for goods and services, the last positive trade balance was all the way back in July 2021.

USD/JPY: The Week Ahead

There are several potential market-moving data releases this week, including, US Manufacturing PMI for August, US Home Sales for July, and the crucial US Core PCE inflation data. Not forgetting that fed Chair Powell will speak at Jackson hole symposium on Friday. Ahead of Powell’s speech, the Tokyo Core CPI number will shed light on Japanese inflation. With this in mind, traders are bracing for volatility in the coming days.

Dollar to Yen Exchange rate Outlook

The daily price chart shows USD/JPY has hurdled the 50-Day Moving Average (DMA) at 135.50 (green line). As a result, thee price now targets the 139.38 high from July. Above that, the next significant level to watch is the August 1998 high of 147.67.

Considering the dollar’s current momentum, an extension above the July high cannot be ruled out. However, the impending data will play it’s part. Should the economic data out of the US disappoint, the dollar may soften. In that event, the 50-DMA provides the first support level. Below that, the 100-DMA at 132.09 (blue) provides additional cover for the bulls.

USD/JPY Price Chart

Elliot Laybourne
Elliott is a former investment banker with a 20 year career in the city of London. During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making. During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others. Today, he splits his time between Thailand and Dubai, from where he provides trading consultancy and business development services for family office and brokerage clientele.