Home Forex The Japanese yen is hovering near YTD lows against the USD, bearish potential seems intact

The Japanese yen is hovering near YTD lows against the USD, bearish potential seems intact

by SuperiorInvest


  • The Japanese yen continues to be undermined by dovish BoJ remarks on Thursday.
  • Fed rate cut uncertainty keeps USD bulls on the defensive and caps gains.
  • Traders will also prefer to wait for US consumer inflation data due next week.

The Japanese yen (JPY) is oscillating in a narrow range against its US counterpart during Friday’s Asian session, consolidating heavy losses from the previous day to a fresh YTD low. Bank of Japan (BoJ) Deputy Governor Shinichi Uchida said on Thursday that aggressive tightening was unlikely even after abandoning negative interest rate policy. This, along with the recent bull run in equity markets, continues to support the safe-haven JPY. The American dollar (USD), on the other hand, is standing high near its nearly three-month high touched earlier this week, proving to be another factor acting as a tailwind for the USD/JPY pair.

This means that uncertainty about the way the Federal Reserve (Fed) will cut rates is keeping USD bulls from placing aggressive bets. Moreover, expectations that large Japanese firms could offer significant wage increases this year will support sustainable and stable inflation, allowing Combat move away from its ultra-dovish monetary policy stance and should help limit JPY losses. Traders may also prefer to wait for the release of the latest US consumer inflation data next week to indicate future Fed policy decisions, which will play a key role in influencing short-term USD price dynamics and determining the next part of the directional movement. for the USD/JPY pair.

Daily Digest Market Movers: Japan under pressure after Uchida’s dovish remarks

  • The Japanese yen saw aggressive selling on Thursday, falling to a new low since 2010 against the US dollar in response to dovish remarks by Bank of Japan Vice Governor Shinichi Uchida.
  • In a press release, Uchida signaled a gradual departure from the current negative interest rate environment and said the BoJ does not plan to take any drastic action in the near future.
  • Chief Cabinet Secretary Yoshimasa Hayashi said this Friday that it was up to the BoJ to decide the details of monetary policy, and Uchida’s comments were the same as Governor Ueda’s last meeting.
  • Japanese Finance Minister Shunichi Suzuki said specific monetary policy was decided by the BoJ and that it was important for currencies to move stably and reflect fundamentals.
  • Robust US macro data, along with recent hawkish comments from several Federal Reserve officials, have forced investors to scale back their expectations for an early and sharp interest rate cut this year.
  • Richmond Fed Thomas Barkin said on Thursday that the central bank has time to be patient on rate changes and that it needs good inflation numbers to sustain and expand.
  • Barkin further added that the labor market remains buoyant and it is difficult to determine the appropriate course of action for rates based solely on economic models.
  • The yield on the benchmark 10-year US Treasury note is holding comfortably above 4.0%, although it will not do much to impress the US dollar bulls or provide any significant impetus to the USD/JPY pair.
  • Traders now seem reluctant to make aggressive bets, preferring to wait for the release of US consumer inflation data next week to get fresh cues on the Fed’s future policy decision.

Technical Analysis: USD/JPY looks poised to reclaim the 150.00 mark and strengthen further

Technically, the overnight break through the horizontal barrier of 148.80 was seen as a new trigger for bullish traders and could have already set the stage for further gains. In addition, oscillators are the order of the day diagram are comfortably in positive territory and are still far from being in an overbought zone. This further confirms the constructive setup and suggests that the path of least resistance for the USD/JPY pair is to the upside. Thus, subsequent strength to regain the psychological mark of 150.00, for the first time since November 17th, looks like a clear possibility. Some subsequent buying should pave the way for an extension of the recent uptrend witnessed since the beginning of this year.

On the other hand, any meaningful corrective decline now seems to find decent support near the 149.00 mark ahead of the 148.80 break point of strong resistance. This should act as a key pivot point which, if decisively broken, could trigger a technical sell and drag USD/JPY pair back to a round value of 148.00. The downward trajectory could further extend towards a test of the 100-day simple moving average (SMA) around the 147.60 area. Failure to defend the latter will negate the positive outlook and shift the short-term bias in favor of bearish traders.

Today’s Japanese Yen Price

The table below shows today’s percentage change of the Japanese Yen (JPY) against the major listed currencies. The Japanese yen was the weakest against the New Zealand dollar.

American dollar euros GBP CAD AUD JPY NZD CHF
American dollar 0.00% 0.00% 0.01% 0.06% 0.00% -0.24% 0.01%
euros 0.00% 0.00% 0.01% 0.06% 0.01% -0.25% 0.01%
GBP 0.00% -0.01% 0.02% 0.06% 0.01% -0.24% 0.02%
CAD -0.02% -0.02% -0.02% 0.04% -0.02% -0.26% 0.00%
AUD -0.06% -0.07% -0.06% -0.05% -0.06% -0.30% -0.03%
JPY -0.01% -0.01% 0.01% 0.00% 0.03% -0.23% 0.02%
NZD 0.24% 0.23% 0.23% 0.24% 0.29% 0.24% 0.25%
CHF -0.04% -0.04% -0.04% -0.03% 0.02% -0.03% -0.28%

The heat map shows the percentage changes of major currencies against each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the box will be EUR (base)/JPY (rate).

Frequently asked questions about the Japanese yen

The Japanese yen (JPY) is one of the most traded currencies in the world. Its value is largely determined by the performance of the Japanese economy, but more specifically by Bank of Japan policy, the difference between Japanese and US bond yields, or risk sentiment among traders, and other factors.

One of the mandates of the Bank of Japan is to control the currency, so its actions are crucial for the yen. The BoJ has sometimes directly intervened in currency markets, generally to depress the yen, although it often refrains from doing so because of political concerns of its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus for the economy, has caused the yen to weaken against its major currencies. The process has recently been exacerbated by growing policy differences between the Bank of Japan and other major central banks, which have decided to sharply raise interest rates to combat decades-high levels of inflation.

The BoJ’s stance of sticking to an ultra-loose monetary policy has led to a widening policy divergence with other central banks, especially the US Federal Reserve. This supports the widening of the spread between the 10-year US and Japanese bonds, which favors the US dollar against the Japanese yen.

The Japanese yen is often seen as a safe investment. This means that during times of market stress, investors are more likely to put their money into the Japanese currency due to its perceived reliability and stability. Turbulent times are likely to strengthen the yen against other currencies that are considered riskier for investment.

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