Is the Yen’s Plunge Over? Investors Ready for More Declines

Start Trading
  • The Bank of Japan remains unbothered by a weak yen.
  • A pennant setup indicates further upside.
  • The 140 mark might showcase this summer.

The Japanese Yen pairs saw 2022 as an opportunity to breakout. The yen depreciates against peers, while most traders perceive the move as overextended. But, should you worry?

True enough, the yen has plunged by over 20% against the USD alone. Moreover, the drop was swift, with USD-JPY moving from 116 in March to well beyond 135. The rapid Japanese currency depreciation had most investors worrying about the pessimistic results of the plunging currency on the nation’s economy.

The latest report from Tankan indicates limited overall effects, showing the BOJ might not shift its monetary policy stance soon.

Possible Pennant Setup Suggests More Upside

The yen’s slump saw a temporary pause recently. A month ago, USD-JPY hit 135 and consolidated since. However, the consolidation region seems like a continuation formation. The market seemed to consolidate before another upside move ahead of Friday’s NFP (non-farm payrolls) data.

The technical outlook is yet to signal reversals. Evaluating 2022 price action shows a 6-month-long ascending triangle that emerged before the asset broke higher. The 116 level might have proved essential. The market smoothly exploded towards the resistance at 130 after moving above this mark.

An overtaken resistance becomes support. That saw the price bouncing from the pivotal zone with the first test, reacting at a horizontal foothold. Meanwhile, July will see critical economic events. Analysts expect the United States Federal Reserve to raise interest rates by 50 basis points, and it can execute a 75bp hike.

Meanwhile, the battle to curb surging inflation will mean increasing the gap with other banks as far as rates are concerned. However, the Bank of Japan doesn’t have to hike rates and keeps smoothening the financial policy.

Thus, the yen will likely extend downside, and the potential consolidation around the current level is nothing besides a continuation setup. Meanwhile, the pair might attempt an upswing beyond 140 following hawkish Federal and the BOJ that will unlikely alter its fiscal policy stance.

Start Trading

Leave a Comment

1 Institute Trade Blog | All Rights Reserved 2022 | Disclaimer | ✉ Contact