Japanese Yen Forecast: USD/JPY Bearish As Yields And Oil Drops
The Japanese Yen has been among the top-performing currencies in the G10 space this week. This has come amid the pullback in both global bond yields and oil prices, two factors that have been a key driver of the Yen this year. Keep in mind that Japan is a net importer of oil and thus lower oil prices should be supportive for the Japanese Yen. Meanwhile, falling global bond yields reduce the yield disadvantage that the Yen has.
Overnight, the latest Japanese CPI figures printed in line with market estimates with the headline above the BoJ’s 2% target for a second consecutive month. However, the preferred core measure (ex-food & energy) is still some distance away from the Bank’s target, rising only 0.8%, which in turn will likely see the BoJ remaining as the last dovish central bank.
DailyFX Calendar
Source: DailyFX
As long as the BoJ is the odd one out as global central banks tighten, a significant reversal in USD/JPY is unlikely, unless Japanese Officials take action against a weaker Yen or a BoJ pivot. However, that is not to say USD/JPY can’t experience pullbacks, as such, with oil and yields softer and positioning very short on the Yen, the short-term outlook is bearish for the pair. That said, on the downside, support is situated at 131.35-50 (May highs & Last week's low), below which puts 130 in focus.
USD/JPY Chart: 4-Hour Time Frame
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Source: IG
USD/JPY Chart: Weekly Timeframe
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Source: Refinitiv
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