Long

USDJPY may have already found its bottom and is now on a rising

USDJPY may have already found its bottom and is now on a rising path

Technical Analysis

USDJPY found long-term horizontal support (1.5 yrs) at 140.00 in April and began a slow rebound, forming consistent higher lows—signaling strengthening bullish momentum despite no clear breakout yet.
The EMAs across multiple timeframes are starting to converge after an extended bearish phase for months, indicating a possible bullish reversal as momentum shifts.
From an Elliott Wave perspective, the correction phase appears to have completed a full three-subwave, with Wave C ending at the same level as Wave A—forming a "Regular Flat Corrective Wave." This means USDJPY may now in an early stages of a new bullish impulse wave, signaling potential for extended upside.
If USDJPY can break and close above the previous high near 150.00, it would confirm the bullish reversal and could further strengthen upward momentum.
However, this analysis would be invalidated if the price closes below the key support around 142.00, in particularly if it drops below 140.00, which could signal a significant deeper downside.

Macroeconomic Analysis
In the long term, Japan has already passed its golden era driven by the Baby Boomer workforce and has now in an aging society. This structural demographic shift is reducing Japan's economic dynamic by slowing growth in productivity and overall consumption. As a result, demographic headwinds will likely weigh on Japan’s long-term economic momentum.
Japan’s tech and industrial edge, once dominant in autos and electronics, has eroded under pressure from China and South Korea, weakening long-term competitiveness and weighing on the yen.
On the trade front, Trump’s tariffs have reshaped global trade, hurting Japan’s export-led sectors like steel and autos. This likely reduced Japan’s trade surplus with the U.S., and by economic theory, this will cause the yen to weaken against the dollar. (Although the yen has recently strengthened due to President Trump’s announcement on Wednesday that Washington and Tokyo had reached a trade agreement, this is likely just a short-term market sentiment that will fade.)
In the near term, political uncertainty is also weighing on the yen. The Liberal Democratic Party's loss in the Upper House elections could hinder the government's legislative efforts. Rumors that PM Ishiba plans to resign could further undermine investor confidence in the yen.
Moreover, an uncertain impact of US tariffs on Japan makes it unlikely that the Bank of Japan (BoJ) can raise interest rates soon. This supports the continuation of the Yen Carry Trade, putting additional pressure on the yen.
Japan’s July Manufacturing PMI stayed in contraction at 48.8, while services slightly recovered. Q1 2025 GDP shrank -0.7% QoQ (annualized), reinforcing slowdown concerns and limiting BoJ’s room to hike rates.
Japan needs a new S-curve driver—like a tech revolution—to regain strong growth and restore confidence in the yen. Without it, further yen depreciation is likely.

Analysis by: Krisada Yoonaisil, Financial Markets Strategist at Exness

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