Japanese Yen Price Forecast Talking Points:

  • Japanese Prime Minister Shinzo Abe announced his resignation overnight, citing health reasons.
  • Shinzo Abe and his ‘Abenomics’ stimulus plan was what helped the Yen to drop by more than 50% against the US Dollar from 2011-2015.
  • The overnight announcement wasn’t necessarily a surprise as this theme has been brewing for a few days, as discussed by Warren Venketas earlier this morning; but the Yen surged on the back of the announcement and USD/JPY is testing a big area of support.
  • This article incorporates price action to help with support/resistance identification. To learn more about price action, check out our DailyFX Education section.

USD/JPY Drops, Yen Surges as Abe Announces Resignation

The ‘Abenomics’ theme from Shinzo Abe’s 2011 election run had a profound impact on Japanese markets, the Yen included, as the currency went on to lose more than 50% of its value over the next few years. The ‘three pillars’ approach to economic policy left many markets wanting in terms of Japanese GDP growth, but one thing that did clearly show was strength in the Nikkei on the back of Abe’s plans, helped along by a very weak Japanese Yen.

But, after USD/JPY topped in June of 2015, it’s largely been in varying states of consolidation ever since, with price action getting tighter and tighter in recent years, as highlighted on the monthly chart below.

USD/JPY Monthly Price Chart

USDJPY Monthly Price Chart

Chart prepared by James Stanley; USD/JPY on Tradingview

With both the USD and JPY being considered as ‘safe haven currencies’ to a degree, the pair went haywire in February-March as the pandemic was beginning to get priced-in to global markets. A quick spike above 112.00 was followed by a fast drop down below 102 over the course of a couple of weeks. This set a range that has yet to be violated, and that range produces a couple of key analytical elements that are coming back into play.

The 105.40 area is the 38.2% Fibonacci retracement of the February-March major move, and this comes after the 50% marker of that same major move helped to set resistance.

USD/JPY Daily Price Chart

USDJPY Daily Price Chart

Chart prepared by James Stanley; USD/JPY on Tradingview

JPY Strategy: Is Yen Strength on the Horizon?

Taking a step back to the weekly chart of USDJPY and we can put the past few years’ worth of digestion into scope. This also highlights a number of possible supports that may come into play if the current zone of confluence cannot hold the lows.

USD/JPY Weekly Price Chart

USDJPY Weekly Price Chart

Chart prepared by James Stanley; USD/JPY on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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