- Amidst upward momentum, the exchange rate of the USD/JPY currency pair is stabilizing around the resistance level of 150.55 at the time of writing this analysis.
- Recently, the US dollar remained stronger against other major currencies, with the US economic performance still robust despite the Federal Reserve's tightening policy.
- Conversely, the Japanese yen continues to suffer from the consequences of continued negative interest rates from the Bank of Japan alongside economic stagnation.
The Nikkei 225 index of Japanese stocks rose above the psychological level of 40,000 for the first time, opening the door for further gains in its historic rise. According to stock trading platforms, the leading index rose by up to 1% to 40,314.64, a new record during the day. Technology stocks, which helped drive stocks higher last year, led the way, with Advantest Corp among the top-performing stocks. Moreover, the local investors contributed to boosting movement on Monday, joining global funds that were the main driver of the rally. SBI Securities Co, Japan's largest online brokerage, stated that its stock trading app experienced a brief outage when a flood of customers tried to log in.
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The broader TOPIX index also fluctuated between small gains and losses. It has been on an upward trend but remains about 6% below the record it set more than three decades ago before the burst of Japan's asset price bubble. Also, the Nikkei index regained its peak from 1989 last month as investors from around the world poured into Japan's largest companies due to improved shareholder returns, a weak yen, and thriving corporate profits. Warren Buffett's endorsement of Japanese trade last year boosted confidence in the country's market, and concerns about a slowdown in China prompted many funds to shift to Japan.
Generally, movements in the Nikkei index have been weak since reaching this important level on February 22, with investors taking profits and some analysts expressing surprise at the speed of the rise. However, the downside has been limited as investors stepped in to buy on dips. Nevertheless, many foreign investors remain optimistic about Japanese stocks. BlackRock, the world's largest asset manager, and Amundi, Europe's largest asset manager, expect earnings growth and corporate governance changes to sustain strength. Furthermore, the Tokyo Stock Exchange encourages companies to publish reports on their plans to enhance stock valuations. Recently, some have announced stock buybacks and profit increases. Clearly, the management takeover operations are on the rise, and activist investors are stepping up their campaigns.
Economic Outlook
The data released showed that business sentiment is improving. Japan's capital spending on goods excluding software jumped in the fourth quarter of 2023. Meanwhile, the country's government is considering calling for a formal end to deflation, Kyodo reported over the weekend.
USD/JPY Technical analysis and Expectations Today:
As we expected, the performance of the US dollar against the Japanese yen “USD/JPY” will remain bullish, and the psychological resistance of 150.00 will continue to motivate bulls in the direction. As we mentioned before, the discrepancy between the US central bank’s policy and the Bank of Japan will remain an important factor for buying the US dollar against the Japanese yen (USD/JPY) pair from every level is down. As for the dollar, the testimony of US Central Bank Governor Jerome Powell will be awaited after the announcement of US job numbers. Currently, the closest resistance levels to the trend are 150.85, 151.20, and 152.00, respectively.
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