USD-JPY Exchange Rate: Slowing Momentum Suggests Recovery Above 147.00
In recent weeks, the US Dollar (USD) has shown signs of recovering against the Japanese Yen (JPY), with the exchange rate currently hovering around the 145.50 mark. This comes after a prolonged period of USD weakness that saw the pair reach a 20-year high of 147.11 in late September 2021.
Technical Analysis: USD-JPY Recovery
According to UOB Group’s FX strategists Quek Ser Leang and Peter Chia, the slowing momentum in the USD-JPY pair suggests that any decline in the USD is unlikely to reach the 147.00 level again. Their analysis is based on the technical indicators, which show that the pair has formed a double top pattern at 147.00.
A double top is a bearish chart pattern that occurs when a security reaches a high price level twice, with a dip in between. The second peak confirms the bearish trend, and the subsequent decline indicates that the price will likely test the support level. In the case of USD-JPY, the support level is around 144.50, and the pair needs to remain below this level for further declines to be likely.
Long-term Outlook: USD-JPY Technical Target Met Sooner Than Expected
The UOB strategists had previously forecasted that the USD-JPY pair would reach the 147.00 level by the end of 2021. However, the pair reached this level earlier than expected, and the subsequent correction has confirmed their bearish outlook. They now expect the pair to trade sideways in the short term before resuming its downtrend towards the 143.00 level in the longer term.
Impact on Individuals: USD-JPY Exchange Rate Fluctuations
For individuals holding USD or JPY, the fluctuations in the USD-JPY exchange rate can have significant implications. Those holding USD and planning to travel to Japan or make purchases in JPY will benefit from the weaker USD. Conversely, those holding JPY and planning to travel to the US or make purchases in USD will face higher costs.
For businesses that import or export goods between the US and Japan, the exchange rate can impact their profitability. A weaker USD makes US exports more expensive for foreign buyers, which can lead to lower demand and lower profits. Conversely, a stronger JPY makes Japanese exports cheaper for foreign buyers, which can lead to increased demand and higher profits.
Impact on the World: USD-JPY Exchange Rate and Global Economy
The USD-JPY exchange rate can also have broader implications for the global economy. A weaker USD can lead to higher inflation in the US, as imported goods become more expensive. This can lead to higher interest rates and a stronger US dollar in the long term, which can negatively impact US exports and economic growth.
On the other hand, a stronger JPY can lead to deflation in Japan, as imported goods become cheaper. This can lead to lower interest rates and a weaker JPY in the long term, which can boost Japanese exports and economic growth. However, a stronger JPY can also make Japanese exports less competitive in the global market, which can negatively impact Japanese businesses and the economy as a whole.
Conclusion: USD-JPY Exchange Rate Outlook
In conclusion, the recent recovery in the USD-JPY exchange rate suggests that any further declines in the USD are unlikely to reach the 147.00 level again. However, the pair is expected to trade sideways in the short term before resuming its downtrend towards the 143.00 level in the longer term. Individuals and businesses holding USD or JPY can be impacted by the fluctuations in the exchange rate, and these impacts can have broader implications for the global economy.
- USD-JPY pair forms double top pattern at 147.00
- Slowing momentum suggests any decline in USD is unlikely to reach 147.00 again
- Long-term outlook: USD-JPY to trade sideways before resuming downtrend towards 143.00
- Impact on individuals: USD holders benefit from weaker USD, JPY holders face higher costs
- Impact on the world: Weaker USD can lead to higher inflation and interest rates, stronger JPY can lead to deflation and lower interest rates
