USDJPY:
The yen weakens today as domestic focus turns to cabinet formation after Sanae Takaichi’s election as prime minister. Markets interpret the reshuffle as an extension of a growth-supportive fiscal stance and a tolerant view of a softer currency to aid exports—encouraging investors to buy dollars against the yen. The pair trades near ¥151 per dollar, responding to political changes and expectations around future Ministry of Finance priorities.
On monetary policy, the Bank of Japan remains cautious: rising wages and inflation support gradual normalization, but the central bank avoids abrupt steps to safeguard the recovery. In the absence of firm guidance on the pace of rate increases, the US-Japan yield differential stays wide, favoring a stronger dollar versus the yen.
The global backdrop also supports upside: steady demand for dollar assets amid the US policy narrative and still-high US real yields continues to channel flows into the dollar. Tokyo’s verbal interventions remain a risk, but for a sustained trend reversal they would require support from yields and concrete tightening moves—which are not yet evident.
Trading recommendation: BUY 151.35, SL 150.85, TP 152.05
Origin: FreshForex
