The USD/JPY price has been in an upward trend in the past few months. It is trading at 118.25, which is the highest it has been since February 2016. It has jumped by more than 2.76% year-to-date.
Japanese yen retreats
The Japanese yen has dropped significantly against the US dollar, euro, and the British pound in the past few weeks as concerns about the Japanese economy remain.
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There are signs that the country’s economy will start slowing down because of the ongoing supply chain challenges. For example, countries like Toyota announced that it will slow down its production in Japan after a supplier was hit by a cyber attack.
Other automakers have expressed challenges sourcing parts and reaching their overseas buyers. This is notable since Japan is mostly an exporting country that makes most of its money overseas.
Data published on Wednesday morning revealed that Japan’s exports rose by 19.1% in February after rising by 9.6% in January. While this was an improvement, it was significantly lower than the previous 21%.
Japan’s imports rose by 34% after rising by 38.7% in January leading to a trade surplus of over 668 billion yen. Analysts were expecting this surplus to fall to about 112.6 billion yuan.
The next key catalysts for the USD/JPY will be the upcoming Federal Reserve and Bank of Japan (BoJ) interest rate decisions.
Economists expect that the Fed will deliver a relatively hawkish tone. It will raise its interest rates by about 0.25% and signal that more hikes are coming.
The BOJ will start its monthly meeting on Thursday and deliver its decision on Friday. Analysts expect that the bank will also sound hawkish because of the rising inflation in the country.
USD/JPY forecast
The daily chart shows that the USD/JPY pair has been in a strong bullish trend lately. The gains accelerated after the pair rose above the key resistance level at 116.38, which was the highest level this year.
The pair remains above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved above the overbought level.
Therefore, the path of the least resistance for the pair is to the upside. If this happens, the next key resistance level to watch will be at 120.
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Source: https://invezz.com/news/2022/03/16/usd-jpy-forecast-bullish-trend-intact-ahead-of-fed-decision/