Last week, the Japanese yen experienced a significant decline, dropping by 2.16%. The main reason was the Bank of Japan's adherence to its loose monetary policy without adjusting interest rates, leading the market to anticipate further depreciation of the yen. In contrast, other major currencies such as the euro, the Australian dollar, and the British pound all appreciated last week.
The Federal Reserve announced an interest rate cut last week, lowering the federal funds rate by 50 basis points to 4.75%~5.0%. Although Federal Reserve Chair Jerome Powell emphasized that there is no hurry to cut rates further, the market still expects more rate cuts by the end of this year. Meanwhile, dovish comments from Bank of Japan Governor Kazuo Ueda, particularly his cautious stance on inflation risks, have further exacerbated concerns about the yen's depreciation.
Next, the market's focus will be on the upcoming Liberal Democratic Party leadership election in Japan and U.S. economic data. If U.S. economic data is strong, the USD/JPY exchange rate could rise further. Technical analysis shows that the USD/JPY has broken above the 21-day moving average, and if it holds, the next target could be between 146~147. Conversely, if it falls below this moving average, the support level is expected to be around 140.
