rose to 154.98 on Monday, and the yen continued to fall. Pressure on the currency increased following statements by Japanese Prime Minister Sanae Takaichi. Over the weekend, the politician noted that a weak yen could be a significant advantage for export industries, indicating that Takaichi continues to favor a softer exchange rate. He later clarified that his comments referred to the need to build an economy resistant to currency fluctuations.
On Friday, the yen lost about 1% against the dollar after US President Donald Trump nominated Kevin Warsh as the next chairman of the Federal Reserve. The market viewed this election as more “hawkish”, supporting the dollar and increasing pressure on the yen.
An additional factor of uncertainty remains the upcoming extraordinary vote in the lower house of parliament on February 8. Takaichi's ruling party is expected to strengthen its position and promote expansionary fiscal policies, raising the risk of further debt. In this context, both
Japanese government bonds and the yen came under pressure last month.
Expectations of fiscal stimulus and debate over tax breaks increase the burden on public finances and restrict demand for the national currency.
Technical analysis
On the H4 chart, a corrective bounce occurs after a sharp decline from the 158.50-159.00 area. The price recovered from a low in the 152.00 area and is testing the 155.50 area, but remains below the medium-term resistance. The structure still looks corrective within the broader bearish phase until quotes settle above 156.50-157.00.
The H1 chart shows that after a sharp decline, the pair entered a recovery phase and has been sequentially updating local highs. The price rose above the 153.26-153.88 zone and is trading along the upper end of the Bollinger Bands, indicating continued near-term momentum. TO
A slowdown is seen near the 155.50-155.60 level, with a possible pause or pullback within the ongoing correction.
Conclusion
In summary, the USD/JPY bounce is primarily a technical correction within a broader bearish context for the yen. The move is exacerbated by political commentary favoring a weaker currency and bolstered by an aggressive appointment by the Federal Reserve. While near-term momentum persists, the pair faces significant resistance going forward. The fundamental backdrop of Japan's planned expansionary fiscal policy continues to put structural pressure on the yen, suggesting that the current rally may be limited in scope before the broader downtrend potentially resumes.
By RoboForex Analysis Department
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Disclaimer: Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
