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The USD/JPY exchange rate forecast for this week

Naoto Arase, Head of the Fintech Department at PPLS.
Naoto Arase, Head of the Fintech Department at PPLS.

The USD/JPY exchange rate forecast for this week

The USD/JPY briefly dropped to 140.75 last Friday but recovered to 141 yen after the US market opened.

The Ichimoku cloud upper limit continued to provide support and a strong bullish signal was indicated by the perfect order that lit up.

Additionally, the daily candlestick chart showed an upward break above the Ichimoku Conversion Line and Base Line, as well as a break above the Fibonacci 50 per cent retracement level of 141.16 based on the June 30 high of 145.07 and the July 14 low of 137.25.

These technical factors suggest a strong market sentiment.

Fundamentally, there are also factors supporting the continuation of the USD/JPY uptrend.

Firstly, there is speculation the Federal Reserve will continue tightening monetary policy to tackle high US interest rates.

Secondly, there is an expectation that the Bank of Japan will continue its monetary easing policy, which keeps Japanese interest rates low and stable.

Lastly, there is anticipation the widening interest rate differential between the US and Japan will lead to a resumption of the yen carry trade.

The parallel rise of US interest rates and US stocks also suggests risk appetite is driving the selling of the yen and supporting the USD/JPY.

Therefore, based on these factors, we maintain our main scenario of buying the dollar and selling the yen.

In terms of economic data releases, focus will be placed on the five- and 10-day Tokyo Mid Price daily morning announcements.

There were also the US May Housing Price Index, US May S&P Case-Shiller Home Price Index, US July Consumer Confidence Index and US July Richmond Fed Manufacturing Index to look out for.

However, attention will be foremost on this week’s significant monetary policy events, with the US Federal Open Market Committee (FOMC) and European Central Bank (ECB) Governing Council to convene, and the Bank of Japan (BOJ) Monetary Policy Meeting.

Due to the cautious sentiment ahead of these events, no major movement is expected.

The predicted range for this week is 140.75 to 142.25.

Content image - Phnom Penh Post


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