USD/JPY Forecast as Japanese Yen Crashes to Two-Decade Low

The USD/JPY exchange rate soared to the highest level in over 24 years as the US dollar strength continued. It surged to a high of 145, which was substantially above the year-to-date low of 113.46. The pair has jumped by more than 30% in the past five years.

Japanese yen crash

The USD/JPY price continued rising as the divergence between the Bank of Japan (BoJ) and the Federal Reserve widened. In the United States, the Fed has maintained a hawkish tone in the past few months. It has increased interest rates by 225 basis points and started quantitative tightening (QT). 

The BoJ, on the other hand, has maintained a dovish tone even as inflation surges to the highest level in decades. While other central banks have hiked interest rates in the past few months, the BoJ has hinted that it will continue easing. It has left interest rates in the negative zone and continued with its quantitative easing (QE). 

The next key catalyst for the USD/JPY pair will be the upcoming Japanese GDP data that are scheduled to come out on Thursday. Analysts expect the data to show that the Japanese economy expanded from 0.5% in Q1 to 0.7% in Q2. This growth will translate to year-on-year growth of 2.9%. Still, the Bank of Japan is expected to maintain its dovish tone.

The other important catalyst for the USD to JPY pair will be the upcoming speech by Jerome Powell that is scheduled on Tuesday. Powell is expected to reiterate that the bank will continue hiking interest rates in the coming meeting.

USD/JPY forecast

The USD/JPY exchange rate has been in a strong bullish trend in the past few months. It has risen in the past 9 straight days and is now trading at the highest point in months. The pair rose above the important resistance level at 139.30, which was the highest level on July 15.

It has jumped above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved above the overbought level. Therefore, the pair will likely continue rising as buyers target the next key resistance level at 150.

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