Technical Outlook: The USDJPY currency pair was seen breaking briefly above a multi-year falling trend line. While this signaled a potential upside breakout, price action quickly gave way to a steep decline. Despite breaking past the horizontal resistance level near 111.49 – 111.08, the USDJPY settled below this level. As price action consolidates around this level, we expect to see potential downside momentum gaining pace. A much needed correction could push the USDJPY lower toward 108.76 over the next couple of months. However, in the near term, we expect the declines to be very gradual.
Fundamental Outlook: Economic data from Japan has been sparse in the month of July. The quarterly BoJ Tankan surveys released earlier in the month showed that large manufacturing and non-manufacturing firms were cautious. This came amid rising trade tensions between the United States and its trading partners. Meanwhile, inflation continues to rise at a sluggish pace. Wage growth, which was one of the aspect that the Bank of Japan was holding on to also remains weak. Amid this backdrop, the yen is likely to maintain its weakness in the near term. On the economic front, no major releases are scheduled for the month ahead.
Previous USDJPY Monthly and Weekly Forex Forecast
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