The USD fell below 105 after the May PMI report was released by S&P Global last week. The DXY index, which measures the performance of the US dollar, shows that it is currently trading in the 104.7 price range. The US dollar is falling on the charts this week, causing other currencies such as the Japanese yen to move north.
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However, despite the dip, currency traders are taking entry positions in the US dollar and not the Japanese yen. The forex market has continued to see buyers in the US dollar against the Japanese yen for almost two months.
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The latest data shows currency traders buying the dips on the US dollar. The development strengthens the USD's resistance, allowing it to bounce back harder when markets return to normal. Therefore, despite the current dip against the Japanese yen, the US dollar has a higher chance of rising above 106.
US dollar versus the Japanese yen
The Japanese yen has been the hardest hit currency against the raging US dollar this year. The yen fell to a 34-year low against the USD and currency traders have no hope of a quick turnaround. On the other hand, the USD is bouncing back harder this year against all leading currencies in the forex markets.
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The dollar has already outperformed more than 22 of the top 23 currencies in Asian markets. The Japanese yen, the Chinese yuan and the Indian rupee have all depreciated significantly against the US dollar.
Analysts predict that the US dollar could regain its 107 price range in the second half of the year. The conflicts in the Middle East are causing institutional funds to seek refuge in the USD. The currency is now consolidating on the charts and a rise could take it to the 106 to 107 level in the coming months.