Technically, Yen on a weekly chart seems to be testing the channel resistance (blue line) since July this year. The channel resistance was last seen kissing by USDJPY in Nov 2017. The lower support of the channel (green line) was touched in mid march 2018 after which pair has only moved up north.
After the sharp fall in Yen from 101.162 on Nov 7 to Dec 12, 2016 to 118.662, Yen has managed to slowly recover while staying within the channel. It has to recover considerably to ensure it stays below this resistance.
Using the Fibonacci Retracements (red line), the immediate support for the pair is seen at 38.2% at 110.2878, while the resistance is at 111.9837 at 50% retracement level.
Though in the short term, the Japanese Yen may further depreciate, but in the longer term, we expect the Yen to retrace back to 108-109 against the greenback.
This week showed a significant increase in the capital spending (which indicates the investment component of GDP) to 12.8 percent from 3.4 percent previously. Next week’s GDP data should throw some more light on the economy fundamentally.
During the last monetary policy, subdued inflation had prompted Bank of Japan to downgrade their inflation forecast though it committed to reach the inflation target of 2 percent, in order to keep yen under control. More action on this would be eyed during the next policy meeting due in a fortnight on September 19.