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USD/JPY Technical Analysis: Testing Psychological Resistance

The bulls succeeded in pushing the price of the USD/JPY currency pair towards and above the psychological resistance 140.00 again. This confirms the strength and continuation of the bullish trend. The currency pair may remain in its path until the markets react to the US inflation figures next week.

Japanese Prime Minister Fumio Kishida has proposed a long list of policy goals for the year, with speculation continuing about Kishida possibly calling snap elections. The government’s fiscal policy plan did not include any figures on the total cost of the proposed policies, or how they would be financed, leaving the question of how to achieve these goals unanswered.

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The Kishida administration added a raft of new policies to the draft in various areas where Japan faces challenges, from childcare and supply chains to greening its economy. While the source of the funding remains unclear, the plan may still help restore Kishida’s approval ratings, as speculation swirls that he may call an election sometime soon. “We want to solve social problems and, by doing so, create new growth drivers, building a more sustainable and inclusive society,” said Kishida.

The Japanese cabinet is expected to approve the proposal in the middle of this month.

Continuing from last year, the government has also made clear its goal of pursuing fiscal soundness, although it has not stated its goal of achieving initial balance by the year ending March 2026 for the second year in a row. Japanese Economy Minister Shigeyuki Goto told reporters that the target remains, although it was not written into the policy plan. The government also said Japan’s economy has returned to normal from the pandemic, suggesting that public funds will be used more for Kishida’s new policy wish list rather than relief from Covid-19.

This year’s policy proposal also reiterated the Bank of Japan’s target of a sustainable inflation rate of 2%, with the addition of a provision about the need for wage gains, suggesting that the government remains consistent with the central bank’s policy directives.

  • By testing the psychological resistance level 140.00, confirmation of the strength of the bullish trend for the USD/JPY currency pair will remain.
  • According to the performance on the daily chart below, the technical indicators will move towards strong overbought levels, in the event that the currency pair moves towards the resistance levels 140.85 and 141.50, respectively.
  • Its gains will remain subject to future tightening of US central bank policy and hints of Japanese intervention in the markets to stop further collapse of the Japanese yen.

On the other hand, and for the same period of time, the movement of the dollar / yen currency pair towards the support levels 138.80 and 137.00 will be important for the bears to control the direction.

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