• The Japanese Yen is undermined by the weaker Tokyo Core CPI released on Friday.
• The USD holds steady just below the monthly peak and lends support to USD/JPY.
• Traders, however, seem reluctant amid the uncertainty over the Fed’s rate cut path.

The Japanese Yen (JPY) kicks off the new week on a subdued note, with the USD/JPY pair oscillating a narrow band above the 148.00 mark during the Asian. Traders now seem reluctant and opt to wait for the outcome of the highly-anticipated two-day FOMC monetary policy meeting on Wednesday amid the uncertainty over the timing of the first interest rate cut. Apart from this, important US macro data scheduled at the start of a new month, including the closely-watched Nonfarm Payrolls (NFP), will play a key role in influencing the US Dollar (USD) and provide some meaningful impetus to the currency pair.

Heading into the key central bank/data risks, a further fall in Tokyo inflation, below the Bank of Japan’s (BoJ) 2% target for the first time in nearly two years, is seen undermining the JPY and lending support to the US/JPY pair. However, the BoJ last week signalled that conditions for phasing out huge stimulus and pulling short-term interest rates out of negative territory were falling into place. This, along with persistent geopolitical tensions stemming from conflicts in the Middle East and a softer risk tone, should help limit any meaningful downside for the safe-haven JPY and act as a headwind for the major.

Daily Digest Market Movers: Japanese Yen lacks any firm direction as traders keenly await FOMC policy meeting

• A further decline in the Tokyo CPI raised doubts that the Bank of Japan will phase out negative interest rates anytime soon and is seen undermining the Japanese Yen.
• The US Dollar stands tall near its highest level since December 13 touched last week and turns out to be another factor acting as a tailwind for the USD/JPY pair.
• Traders, however, seem reluctant and might prefer to move to the sidelines ahead of the crucial two-day FOMC monetary policy meeting starting on Tuesday.
• Data released on Friday showed that inflation rose modestly in December and reaffirmed expectations that the Federal Reserve will cut rates by the middle of 2024.
• The US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index held steady at 2.6% on a yearly basis in December.
• The annual Core PCE Price Index, the Fed’s preferred gauge of inflation, decelerated more than expected, to 2.9% from 3.2% in November.
• Other details showed that Personal Spending rose 0.7% in December while Personal Income grew 0.3%, pointing to strong demand from US consumers.
• This comes on the back of the upbeat US Q4 GDP print and suggests that the economy is still running hot despite tightening financial conditions.
• Growing disinflationary pressures and progress towards the Fed’s 2% target take further tightening off the table, keeping the USD bulls on the defensive.
• The current market pricing indicates an even chance of easing at the March FOMC meeting and a roughly 90% probability of an interest rate cut in May.
• Investors this week will also confront the release of important US macro data scheduled at the start of a new month, including the Nonfarm Payrolls (NFP) on Friday.

Technical Analysis: USD/JPY oscillates in a familiar trading band, 100-day SMA holds the key for bullish traders

From a technical perspective, last week’s failure to find bearish acceptance below the 100-day Simple Moving Average (SMA) and the subsequent move-up support prospects for additional gains. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone, validating the bullish outlook for the USD/JPY pair. Bulls, however, might wait for some follow-through buying beyond the multi-week top, around the 148.80 region, before positioning for a further near-term appreciating move towards the 149.30-149.35 intermediate hurdle en route to the 150.00 psychological mark.

On the flip side, the 100-day SMA, around the 147.55 region, is likely to act to protect the immediate downside. Any further slide is likely to attract some buyers near the 147.00 round figure, which should help limit the downside for the USD/JPY pair near the 146.45 area or last week’s swing low. A convincing break below the latter might shift the near-term bias in favour of bearish traders and drag spot prices to the 146.10-146.00 horizontal support. The downward trajectory could extend further towards the 145.30-145.25 area before the pair eventually drops to the 145.00 psychological mark.

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 Pound Sterling.