- The USD/JPY forecast shows a resilient yen despite a shift in Japan’s political landscape.
- Japan’s ruling party lost the election on Sunday.
- If there is no trade deal by August 1, Japan might face a 25% tariff on its goods.
The USD/JPY forecast shows a resilient yen despite a shift in Japan’s political landscape. The currency edged higher against the dollar despite Japan’s ruling party losing majority seats in the Upper House. However, there is caution as market participants await the implications for the Prime Minister and US-Japan trade negotiations.
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The yen strengthened on Monday after Japan’s ruling party lost the election on Sunday. Prime Minister Shigeru Ishiba’s party got 47 seats out of the 50 required to win a majority in the Upper House. This means that Ishiba has lost most of his power. Already, the ruling party has lost majority of seats in the Lower House. The new loss means a difficult time trying to pass policies.
At the same time, it means uncertainty on trade talks with the US. If there is no trade deal by August 1, Japan might face a 25% tariff on its goods. Such an outcome would weigh on the economy and the yen.
USD/JPY key events today
Market participants do not expect any key economic releases from Japan or the US. Therefore, they will continue to monitor tariff developments.
USD/JPY technical forecast: Bearish RSI divergence
On the technical side, the USD/JPY price has broken below the 30-SMA, showing bears have taken the lead. The price now sits below the SMA, with the RSI under 50, supporting a bearish bias. However, the price is still facing the 148.02 key support level. At the same time, bears must break below the previous low to form a lower low and confirm a new downtrend.
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Previously, the price was trading in a solid uptrend above the 30-SMA, making higher highs and lows. However, this stopped when bulls met the 149.01 resistance level. Here, they could not make a higher high. The price failed to break above the previous high, and the RSI made a bearish divergence. This allowed bears to push the price below the SMA.
A break below 148.02 would confirm the shift in direction and clear the path to the 146.01 support level. However, if the price fails to break below the support level, bulls will likely return to retest the 149.01 resistance.
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