USD/JPY under pressure, Yen regains some lost ground

On Tuesday (August 26), the dollar weakened against the yen (USD/JPY), touching the 147.70 mark. The move marked a partial rebound in the yen, allowing it to recoup some of its recent losses. Selling pressure on the dollar intensified after US President Donald Trump announced the ouster of Federal Reserve Governor Tim Cook over alleged mortgage fraud. The decision raised fresh concerns about the Fed's independence and its ability to set policy free from political interference.

The dollar/yen is under pressure, and the yen has regained some of its losses (Figure 1).

On the domestic front, Kazuo Ueda, governor of the Bank of Japan, said wage growth was expected to continue on the back of a tight labour market, which he believed was laying the groundwork for further rate rises. Although the BoJ left policy rates unchanged in July, it raised inflation expectations and gave a more optimistic assessment of the economic outlook.

This week, investors are also awaiting the release of key economic data from Japan, including industrial output, retail sales, and consumer confidence.

Overall, market sentiment towards the yen is mixed, and the dollar/yen exchange rate is likely to remain range-bound in the short term.

Technical analysis: USD/JPY

The dollar/yen is under pressure, and the yen has regained some of its losses (Figure 2).

(USD/JPY 4-hour chart, source: Internet)

The pair continues to trade in the consolidation range around the 147.33 mark, currently at 146.55 to 148.76. A further fall to the support level of 146.14 is more likely. If it falls to this support level, it is possible to start a new upswing in the future, targeting 151.47. This outlook is supported by the MACD indicator, whose signal line is below the zero axis and in a sharp downward trend.

The dollar/yen is under pressure, and the yen has regained some of its losses (Figure 3).

(USD/JPY 1-hour chart, source: Internet)

The market has completed a rising wave structure to 148.92, followed by a falling wave to 147.00, a process that also defines the boundaries of the current consolidation range. If the exchange rate breaks through the range, it may further rise to 148.40; conversely, if it breaks through the support level, it may start a decline to 146.14. This scenario is confirmed by the stochastic indicator, whose signal line is below 50 and is moving downwards towards 20.

conclusion

At present, the USD/JPY exchange rate is subject to the dual effects of fundamental pressure on the dollar and the Bank of Japan's cautiously hawkish stance (but policy actions rely on data). Technically, the exchange rate is approaching a key decision point, and a break in the current consolidation range may determine the direction of its next major move.

At 18:28 Beijing time, the dollar/yen was trading at 147.585/593, down 0.12%.

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Disclaimer: The content of this article does not represent the views of the Institute of Foreign Exchange. The content is for reference only and does not constitute investment advice. Investors operate accordingly at their own risk.