Japanese Yen

Japanese Yen (6J) Futures: Macro Fundamentals Show a Big Downside Potential

  • Dollar weakness has pushed yen futures’ prices a bit higher.
  • The BOJ’s summary of views for the June meeting is dovish.
  • Bulls are in control on the 4-hour chart.

Japanese Yen (6J) futures prices are pushing slightly higher on Monday, boosted by the declining US dollar. The summary of views at the BOJ’s June meeting was released on Monday and showed some policymakers were concerned by the currency’s recent sharp declines. A board member said sharp yen falls could further hurt the country’s economy as companies have difficulty coming up with business plans.

The summary lacked any rate hike discussions by the Bank of Japan board to slow yen declines.

“A growing number of goods are seeing prices rise due to higher commodity costs and currency volatility. But it’s appropriate to maintain the current monetary policy as the price gains aren’t driven by strong demand,” one member said in summary.

Another member said that the bank had to maintain the current policy to boost wage growth and demand.

There has been a growing divergence in monetary policy between Japan and the United States, threatening to lower Japan’s consumption as the weaker yen inflates import costs.

The only reprieve for the yen will come when inflation in the US peaks and the possibility of a recession goes down. Only then can the dollar weaken against the yen. As long as stagflation looms over the United States and the global economy, the dollar will keep pushing the yen lower as the Federal Reserve aggressively fights inflation.

Japanese Yen (6J) futures technical forecast:

Japanese Yen (6J) futures 4-hour chart
Japanese Yen (6J) futures 4-hour chart

Looking at the 4-hour chart, we see the price of 6J pushing higher. This move comes after the RSI showed a bullish divergence and a weakness in the bearish momentum. The price is currently trading above the 30-SMA, showing bulls have taken over and confirming the bullish divergence. RSI has also crossed above the 50 level, favoring bullish momentum.

If bulls can hold on to their control, then the next target for the price will be at 0.0076300, which has acted as resistance before. A break above this level would start a series of higher highs and higher lows. This new bullish trend will fail if the price cannot trade above the 30-SMA and RSI goes back below 50.