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Locking in at 141.00: The Current State of USD/JPY as 2023 Comes to a Close

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  • USD/JPY stuck to 141.00 as markets head towards 2024.
  • Greenback shed a third of a percent against the Yen on the last Friday of 2023.
  • USD/JPY down a full percent on the week, but up 7% on the year.

The USD/JPY is back into the 141.00 handle as the pair struggles to accelerate momentum in either direction as markets wind up the 2023 trading year.

Post-holiday markets saw a thin week ahead of the New Year’s long weekend, and the US Dollar (USD) is down 0.3% against the Japanese Yen (JPY) for the last Friday of the trading year, shedding a full percentage point on the week.

Forex Today: A new year arrives, focus turns to US labor market data

US economic data continues to miss the mark with the US Chicago Purchasing Managers’ Index (PMI) printing below expectations on Friday, coming into at a contractionary 46.9 in December compared to November’s 18-month peak of 55.8, coming in well below the median market forecast of 51.0.

Steepening misses in US data figures are counter-intuitively supportive of broad-market risk appetite, with investors expecting souring economic outlooks across the globe helping to push the Federal Reserve (Fed) towards a faster pace of rate cuts in 2024.

USD/JPY Technical Outlook

With the USD/JPY up around 7% on the year compared to being in the red for December, the last few trading weeks of 2023 have been particularly Dollar-negative, and there is little technical reason for the trend to reverse direction heading into 2024.

The pair etched in a yearly high of 151.91 in November, coming within inches of October 2022’s peak bids of 151.94 before slumping back toward the 140.00 major handle.

The USD/JPY has closed in the red for all but one of the last seven consecutive trading weeks, and the pair is extending a push into bear country on the south end of the 200-day Simple Moving Average (SMA) near 143.00.

USD/JPY Hourly Chart

USD/JPY Daily Chart

USD/JPY Technical Levels

 

USD/JPY, also known as the “Ninja” or “Gopher” currency pair, is a popular and highly-traded foreign exchange (Forex) pair. This pair represents the exchange rate between the US dollar and the Japanese yen, with the USD being the base currency and the JPY being the quote currency. As 2023 comes to a close, USD/JPY has been garnering attention from traders and investors as it continues to lock in at 141.00. In this article, we will take a closer look at the current state of USD/JPY and the factors driving its performance.

Overview of USD/JPY

Before diving into the current state of USD/JPY, let’s first understand the basics of this currency pair. USD/JPY is considered to be a major currency pair, along with EUR/USD, GBP/USD, and USD/CHF. It accounts for around 17% of total Forex trading volume globally, making it one of the most liquid and actively-traded pairs.

The value of USD/JPY reflects the overall performance of both the US and Japanese economies. As the two largest world economies, any significant changes in these countries can have a direct impact on the value of this currency pair. USD/JPY is also highly sensitive to political and economic events, making it a favorite among traders who seek volatility and opportunity for profit.

Current State of USD/JPY at 141.00

As of December 2023, USD/JPY has been locking in at 141.00 for several weeks. This marks a significant increase from its lowest level in 2023, which was at 104.60 in March. The rise in USD/JPY can be attributed to several factors, including the ongoing pandemic and economic recovery efforts, along with global political events.

The US Economy and Federal Reserve (Fed) Actions

The US economy has been on a steady road to recovery since the height of the pandemic in 2020. The country’s gross domestic product (GDP) has been growing, and unemployment rates have been declining. This has led to positive sentiment among traders, with many viewing the US as a safe haven for investments.

Furthermore, the Fed has been actively providing stimulus packages and maintaining a low-interest-rate policy to support economic growth. This has resulted in a weaker US dollar, which has made USD/JPY more attractive to traders. However, as the US economy continues to strengthen, the Fed may adjust its policies, which could impact the value of USD/JPY.

The Japanese Economy and Bank of Japan (BoJ) Actions

On the other hand, the Japanese economy has been performing relatively well, despite the ongoing pandemic. Japan was one of the first countries to reopen its economy, and its GDP has been steadily growing since then. The country’s industrial sector has also been showing signs of recovery, with strong demand from the US and China.

To support economic growth, the BoJ has also been implementing expansionary monetary policies, including negative interest rates and asset purchases. This has led to a weaker yen, making Japanese exports more competitive globally. As a result, USD/JPY has been more attractive to traders.

Global Political Events

Global political events can also greatly influence the value of USD/JPY. In 2023, the US presidential election and Japan’s leadership change have brought about uncertainties, which can significantly impact the currency pair’s performance. However, as these events have unfolded, the markets have remained relatively stable, with USD/JPY maintaining its strong position.

Factors to Consider when Trading USD/JPY

As with any currency pair, trading USD/JPY requires careful consideration of various factors. It is essential to keep a close eye on economic data, political events, and central bank policies of both countries. Here are some other factors to consider when trading USD/JPY to make informed decisions:

– Economic data from the US and Japan, such as GDP, inflation, and employment rates, can have a direct impact on the currency pair’s value.

– Changes in monetary policy, interest rates, and central bank actions can significantly impact USD/JPY. Pay attention to any announcements or statements from the Fed and BoJ.

– Keep track of global market sentiment, including risk appetite, as it can have an indirect effect on USD/JPY.

Benefits and Practical Tips for Trading USD/JPY

One of the main benefits of trading USD/JPY is its high liquidity and strong volatility. This provides traders with ample opportunities to enter and exit positions quickly, increasing the potential for profit. Additionally, the high volume of trading in this pair means that spreads, or the difference between the buying and selling price, are relatively low, making it cost-effective for traders.

When trading USD/JPY, it is essential to keep a close eye on both the US and Japanese economies, along with major global events. Additionally, managing risk through proper risk management techniques, such as setting stop-loss orders, is crucial when trading this volatile pair. Traders should also diversify their portfolio and not rely solely on USD/JPY for their investments.

Conclusion

As 2023 comes to a close, USD/JPY continues to lock in at 141.00, reflecting a strong performance driven by various economic, political, and global factors. As we move into 2024, it is crucial to keep a close eye on the evolving situations in the US and Japan to make informed trading decisions. Additionally, staying up to date with global market sentiment and practicing risk management strategies can help traders navigate the volatility of this currency pair successfully.

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