The Japanese Yen has continued to fall against the US Dollar as investors express uncertainty regarding the Bank of Japan extending the policy normalization process. The weak Yen is causing concerns about rising inflation in Japan, as it should ideally be driven by wage growth rather than currency fluctuations. The bank’s Summary of Opinions indicated that inflation is mostly induced by the weak Yen, leading to discussions about possible rate hikes. The upcoming release of Japan’s Q1 GDP data will provide more insight into the country’s economic performance.
Despite concerns over the strength of the US labor market, the US Dollar has also been on the back foot, leading to the Japanese Yen extending its downside against the Greenback. This has been fueled by weak Nonfarm Payrolls, lower Job Openings, and an increase in jobless benefits claims in the US. The softening inflation outlook in the US has raised speculation about the Fed returning to policy normalization, with forecasts indicating potential interest rate cuts in September.
Investors will be closely watching US economic indicators such as the Producer Price Index, Consumer Price Index, and Retail Sales data for April to gauge the interest rate outlook. Expectations for April’s inflation data include slower growth in both monthly headline and core CPI. Hot inflation data could offset optimism for Fed rate cuts, while soft inflation figures may strengthen expectations of rate cuts. Traders may adjust bets for the Fed’s interest rate actions based on the upcoming economic data.
Technical analysis indicates that the Japanese Yen’s long-term outlook remains strong, despite recent downside moves against the US Dollar. Investors suspect intervention by Japanese officials to prevent further Yen depreciation, with the USD/JPY pair falling to near 151.82 after reports of intervention. The 200-period Exponential Moving Average has acted as a major support for the US Dollar, suggesting a positive long-term outlook. The 14-period Relative Strength Index hovering near 60.00 may trigger upside momentum with a decisive break above this level.
Economic indicators such as the Gross Domestic Product (GDP) play a crucial role in determining the strength of the Japanese Yen. Japan’s GDP, released quarterly, measures the total value of goods and services produced in the country. A high GDP reading is considered bullish for the Yen, while a low reading is seen as bearish. The upcoming release of Japan’s Q1 GDP data on Thursday will provide insights into the country’s economic performance, guiding investors on the future trajectory of the Japanese Yen.
