US dollar records 2.6% decline against Japanese yen at the end of last week

Short-term upward trend maintained despite declines in USD/JPY pair

By Raed Alkhedr | @raedalkhedr | 9 May 2023

USDJPY Technical analysisss
  • The USD/JPY pair experienced a decline from the resistance level of 138.00

  • The Bank of Japan is persistently implementing its easing policy to provide support to the economy

  • Financial institutions in the Asian region maintain sufficient capital reserves

Significant increase in US dollar against Japanese yen

There has been a significant increase in the value of the US dollar against the Japanese yen at the beginning of the week.

The yen has experienced a noticeable decline against most major currencies since the release of the Bank of Japan's monetary policy meeting minutes from the previous week. These minutes revealed unanimous agreement among members that the bank should continue its easing policy to support the economy while closely monitoring inflation and price movements.

Several Bank of Japan members have emphasized the need to exercise caution regarding the risk of inflation accelerating more than expected, given the prevailing uncertainty surrounding the Japanese economy.

Earlier, Bank of Japan Governor Kozo Oida stated that financial institutions in the Asia region possess sufficient capital reserves and are less susceptible to bank failures. He also stressed the importance for policymakers to exercise caution concerning the potential implications of uncertainty surrounding the US and European economies.

The USD/JPY pair began the day with a slight decline against the Japanese yen, trading near the level of 134.98.

Key technical levels influencing dollar's movement against yen

The USD/JPY pair initially climbed to the level of 138.00 but later experienced a decline, testing the support level of 133.50. This level represents a short-term upward trend line and serves as a lateral support area. The pair successfully held onto this support and rebounded, trading around the 135.00 level.

Should the pair maintain support at 133.50, it has the potential to rise and test the resistance level of 138.00. A successful breakthrough at this level could lead to further upward movement, with potential resistance levels at 140.50 and 142.00.

If the pair breaks below the support level of 133.50, the correction may extend, and the next support level to be tested would be at 132.00. A breach of this level could result in continued decline, leading the pair to test the stronger support level of 130.00. Maintaining this level is crucial for the pair to signal an intention to rise. If 130.00 is breached, the direction of the pair may shift towards a medium- to long-term downward trend, with further decline potential towards the levels of 127.30.

jpy 5-9-2023