HomeNewsUSD/JPY Forecast: Can the Yen Recover?
USD/JPY Forecast: Can the Yen Recover?

USD/JPY Forecast: Can the Yen Recover?

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USD/JPY is making modest gains early Thursday as traders wait for the potentially market-moving US economic data released later in the day.

Earlier this week, the Japanese yen came within a whisker of a new 24-year high, topping out at 143.96 before staging a mild recovery. The Yen’s weakness against the US dollar was fueled by the US inflation data on Tuesday.

The US Consumer Price Index (CPI) was higher than expected, sending shockwaves across markets on Tuesday. Analysts forecast would rise 8.1% (annually) in August. However, the CPI came in at 8.3%, indicating that inflation is falling less than expected. As a result, Interest rate hike predictions shot higher. With some analysts now calling for a 100 basis-point rise at the next FOMC meetinmg.

Treasury bond yield were firmer across the board. Notably, the two-year yield climbed above the five and 10-year, inverting the yield curve. US indices corrected sharply lower following the announcement. Subsequently the blue-chip Dow Jones Industrial Average (DJIA) had its worst trading day since June 2020. The risk-off atmosphere, led the greenback higher, with the US dollar index reaching a twenty-year high. As a result, the yen dropped over 1.2% against the buck, almost breaching the 144.99 high set on September 7.

The dollar to yen rate has dipped lower in the last two days, and currently changing hands around 143.40. However, a slew of economic data out of the US later today could see volatility return.

This afternoon (September 14) sees the release of the Retail sales, Initial Jobless claims and the Philadelphia Manufacturing Index, which could effect the dollar to yen exchange rate.

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US Dollar to Yen Analysis

The monthly price chart shows the dollar is accelerating against the yen. If the rally continues, the `1998 high of 147.60 is the first notable resistance level. Although the Relative Strength Index (RSI) of 83.17 is extremely elevated, suggesting a correction is long overdue. As a result, when the tide turns, its likely to be violent.

Nonetheless, the dollar has the upper hand for now. For this reason, the greenback should trade with a bullish bias against the yen, as long as today’s data is in line with expectations. However, the yen could strengthen considerably if the market reads the data as bad for the dollar.

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.