USD/JPY Key Points
- As of today, the Japanese yen is showing the lowest performance among major currency pairs, and this has been the case throughout the year as well.
- The earthquakes on New Year’s Day have cast doubt on the BOJ’s plans to increase interest rates, while other countries are experiencing positive economic data and less cautious statements from their central bankers.
- GBP/JPY appears to be showing significant strength, while both USD/JPY and EUR/JPY are still clearly exhibiting bullish trends.
USD/JPY Fundamental Analysis
Despite a general trend of risk-averse trading today, the Japanese yen has not gained much favor. In fact, it is currently the weakest performing major currency both for today and for the year, even trailing behind the already struggling Australian dollar.
Other currencies have received a boost from positive economic data and comments from central bankers, such as the UK CPI and US Retail Sales, and remarks by ECB President Lagarde. However, the yen has not experienced any significant news or data related to the country specifically.
Instead, it seems that traders are realizing the disadvantage of holding a currency that does not currently offer any returns. The expectations of interest rate hikes by the Bank of Japan (BOJ) in the first half of the year have significantly decreased after the earthquakes that occurred on New Year’s Day. Following the disaster, BOJ policymakers have expressed concerns about raising rates in the near future, suggesting that the economy may require further stimulus as the country focuses on rebuilding.
In the near future, there is not much economic data specific to Japan until the BOJ meeting on Tuesday, January 23. However, the BOJ has made it clear that they will not make any changes until after the spring wage negotiations. As a result, analysis of intermarket trends and technical factors are expected to have a greater impact on the movement of the yen against other currencies in the upcoming days.
Japanese Yen Technical Analysis – USD/JPY Daily Chart
Considering the USD/JPY currency pair, it is evident that the Japanese yen has not experienced a favorable start to 2024. In fact, USD/JPY has only decreased in value for three days this year, resulting in a gain of over 700 pips (equivalent to a 5% increase) since the end of last year. Looking into the future, USD/JPY has mostly recovered from the decline it experienced in November and December. However, it is important to note that the 78.6% Fibonacci retracement of the pullback at 149.40 still poses as a significant obstacle before the pair can attempt to reach its highest point in 33 years at 152.00.
Japanese Yen Technical Analysis – EUR/JPY Daily Chart
The EUR/JPY has been following a similar pattern to the USD/JPY, with rates rising steadily since the beginning of 2024. Recently, it broke out of a period of sideways movement and found support at 158.60. As we enter this week, the trend appears to continue in an upward direction with potential barriers at 162.00 and 164.25, which are significant levels according to the Fibonacci retracement and the highest point in 15 years.
Also Read: Dollar soars on rising interest rate expectations, euro and Aussie dollar tumble
Japanese Yen Technical Analysis – GBP/JPY Daily Chart
Lastly, the GBP/JPY pair, which is known for its volatility, appears to be the most optimistic. The pair has already recovered almost all of its decline from November to December, and it is nearing its highest point in 8 years at 188.75, which it may reach later this week. Despite a significant rally of nearly 900 pips this year, the 14-day RSI indicator suggests that it is not yet overbought, indicating the possibility of reaching 190.00 or higher next week if the resistance at 188.75 is overcome.
