Will Japanese Yen Extend Plummets in May? USD/JPY Forecast

ByDawn Pipkin

May 2, 2022
  • The USD/JPY maintained continuous uptrends over the previous ten consecutive weeks.
  • The BOJ revealed a highly dovish stance.
  • The pair dipped into an extremely overbought region.

The USD/JPY maintained its bullish outlook in April amid a continued fall of the Japanese yen. While writing these lines, the pair trades at 130.21, its highest mark since 2002. Moreover, the current price stays substantially higher than the levels seen at the start of the year. The assets gained more than 26% from the lowest level in 2021.

Japanese Yen Fall Extends

The USD/JPY, GBP/USD, and EUR/JPY pairs extended their bullish movements in April amid increased fears about the Japanese economy.

The primary reason behind the plummet in the Japanese yen is the Bank of Japan’s dovish tone. For instance, BOJ decided not to adjust interest rates during the last week’s decision. The rates remained where they were since 2016, at -0.10%.

Moreover, BOJ declared continuing its asset buy program, which had its balance sheet surpassing $8 trillion. Such developments mean the Bank of Japan is among the most dovish banks within the G7. Contrarily, the Fed Reserve plans to extend its rate increases this week. The Bank of Canada had raised the rates by 0.50%, whereas the Bank of England has hiked the rates three times.

The BOJ remains slow to increase interest rates due to the nation’s sluggish inflation. Japan remained an exception as most countries saw increased inflation numbers. Japan’s headline CPI hovers at 1%, staying beneath the 2% target by BOJ. Thus, the Bank of Japan trusts interest rate surges will translate to amplified deflation.

However, there are fears about how far the USD/JPY will rise. Remember, a weak yen affects the savings of most individuals in Japan. It also hurts most small companies dealing with product importation.

USD/JPY Prediction

USD/JPY has exhibited a massive bullish bias. The weekly chart shows the pair saw sharp increases within the previous ten consecutive weeks. It climbed beyond the vital resistance zone at 125.86 and 118.71, the highest marks in June 2015 and November 2016, respectively.

The pair steadied beyond the 25- and 50-week Mas as the RSI and MACD entered the overbought territory. Thus, it might see pullbacks in May.

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