- The Japanese Yen struggles to register any meaningful recovery and languishes near the YTD low.
- Bulls remain on the sidelines despite a softer risk tone and the BoJ’s hawkish tilt earlier this month.
- Hawkish Fed expectations continue to underpin the USD and lend support to the USD/JPY pair.
The Japanese Yen (JPY) ticks higher during the Asian session on Tuesday, albeit lacks bullish conviction and languishes near the YTD low touched against its American counterpart the previous day. Persistent worries about geopolitical tensions stemming from conflicts in the Middle East and slowing economic growth in China, along with bets that the Federal Reserve (Fed) might not cut interest rates as much as anticipated, weigh on investors’ sentiment. This comes on top of the Bank of Japan’s (BoJ) hawkish tilt earlier this month and lends some support to the safe-haven JPY.
The USD, on the other hand, stands tall near its highest level in almost three months and remains well supported by growing acceptance that the Fed will keep interest rates higher for longer. The expectations were lifted by Friday’s blockbuster US NFP report and stronger-than-expected US ISM Services PMI released on Monday. Adding to this, the recent hawkish comments by several Fed officials, including Fed Chair Jerome Powell, remain suportive of the recent rise in the US Treasury bond yields. This acts as a tailwind for the Greenback and should help limit the downside for the USD/JPY pair.
Daily Digest Market Movers: Japanese Yen seems vulnerable near YTD low amid bullish USD
- A combination of factors lends some support to the Japanese Yen and keeps a lid on the USD/JPY pair’s two-day-old upward trajectory to its highest level since late November touched on Monday.
- The market sentiment remains fragile on the back of persistent worries about the risk of a further escalation of geopolitical tensions in the Middle East and slowing economic growth in China.
- China’s Central Huijin Investment company reportedly said that it will increase its investment in Chinese stock ETFs and are determined to safeguard the stable operation of the market.
- The Bank of Japan signalled earlier this month that conditions for phasing out huge stimulus and pulling short-term interest rates out of negative territory were falling into place.
- Japan’s real wages fell for a 21st straight month, though at a slower pace, by 1.9% in December from a year earlier, while household spending dropped for a tenth consecutive month.
- Investors continue to scale back their expectations regarding the timing and pace of interest rate cuts by the Federal Reserve in the wake of a still resilient US economy.
- Against the backdrop of Friday’s blockbuster US NFP report, the Institute for Supply Management (ISM) reported on Monday that the US services sector growth picked up in January.
- The ISM Non-Manufacturing PMI increased to 53.4 last month from 50.5 in December, suggesting that growth momentum from the fourth quarter spilled over into the new year.
- The CME Group’s Fedwatch tool indicates that traders have now almost entirely negated bets on a March rate cut and now see just five cuts for this year compared with six previously.
- The yield on the rate-sensitive 2-year US government bond climbed to a one-month high and the benchmark 10-year US Treasury yield holds comfortably above the 4.0% mark, underpinning the US Dollar.
- Minneapolis Fed President Neel Kashkari argued that a possibly higher neutral rate means that the central bank can take more time to assess upcoming data before beginning interest rate cuts.
- Chicago Fed President Austan Goolsbee noted that the economy has been strong and that there have been seven months of good inflation reports, though did not comment on the timing of the first rate cut.
- A slew of influential FOMC members are scheduled to speak again on Tuesday, which will play a key role in driving the USD demand and provide some meaningful impetus to the USD/JPY pair.
Technical Analysis: USD/JPY bulls await a sustained breakout through the 148.75-148.80 barrier
From a technical perspective, bulls need to wait for a sustained breakout through the 148.75-148.80 multiple-tops resistance before placing fresh bets. Given that oscillators on the daily chart are holding comfortably in the positive territory and still far from being in the overbought zone, some follow-through buying beyond the 149.00 round figure will set the stage for additional gains. The USD/JPY pair might then aim back to reclaim the 150.00 psychological mark with some intermediate resistance near the 149.60-149.70 region.
On the flip side, the 148.00 mark now seems to protect the immediate downside. Any further decline is more likely to attract fresh buyers and remain limited near the 100-day Simple Moving Average (SMA), currently pegged near the 147.60-147.55 zone. A convincing break below the latter, however, might prompt aggressive technical selling and drag the USD/JPY pair below the 147.00 mark, towards the next relevant support near the 146.75-146.70 region. The downfall could extend further towards the 146.40 zone en route to sub-146.00 levels, or last week’s swing low.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the US Dollar.
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