- At the beginning of this week, the Japanese yen weakened to below 147 yen against the US dollar, reaching its lowest level in two weeks.
- Meanwhile, it is facing pressure from the strength of the US dollar as the recent US inflation reading prompted traders to reduce their bets on a significant interest rate cut by the Federal Reserve.
- Now, markets are awaiting the crucial monthly US jobs report this week as the Federal Reserve's attention shifts from inflation to the Labor market.
On the domestic front, investors absorbed data showing that Japanese companies increased capital spending by 7.4% in the second quarter, the thirteenth consecutive quarter of growth. The country's manufacturing Purchasing Managers' Index was also revised up to 49.8 from 49.5 in August, nearing stability. On the monetary policy front, Bank of Japan officials recently indicated their readiness to raise interest rates again if economic and price forecasts are met.
According to stock trading platforms, Japanese stocks hit a one-month high. The Nikkei 225 index rose 0.14% to close at 38,701 points, while the broader TOPIX index rose 0.12% to close at 2716 points on Monday, as Japanese stocks recorded a one-month high amid a full recovery from the sell-off in early August triggered by the Bank of Japan's hawkish shift and US recession fears. The weaker yen, which fell to its lowest level in nearly two weeks, also supported domestic stocks.
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Moreover, local shares tracked gains in Wall Street on Friday as the prospect of a U.S. interest rate cut lifted sentiment. Meanwhile, investors digested final data showing that Japanese manufacturing activity remained contracting in August, albeit at a weaker pace than initially expected. Also, we have seen a remarkable performance from the heavyweights in the index such as Advantest (2.3%), SoftBank Group (0.9%), Toyota Motor (0.8%), Mitsubishi UFJ (1.3%), and IHI Corp (5.5%).
USD/JPY Technical analysis and Expectations Today
According to the performance on the daily chart, the USD/JPY price is moving within an ascending channel and the general outlook for the currency pair will be reversed. Obviously, that’ will happen if the bulls move towards the resistance levels of 148.20 and 149.40 and then the psychological resistance of 150.00 respectively. On the other hand, and over the same period of time, the hopes of rising will evaporate if the currency pair returns to the support level of 144.20. As we mentioned before, the USD/JPY price will remain in its current range until the financial markets and investors react to the announcement of the US jobs numbers at the end of the week.
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