In the early European session on Thursday, the Japanese Yen (JPY) demonstrates resilience, putting an end to a two-day losing streak against the US Dollar (USD) and edging closer to the monthly low. This uptick is attributed to repositioning trades ahead of the eagerly awaited US consumer inflation figures, which are anticipated to provide insights into the Federal Reserve’s (Fed) future policy decisions, potentially impacting USD demand. Meanwhile, uncertainty surrounding the timing of potential interest rate cuts by the Fed keeps USD bulls on the defensive, favoring the JPY.
Despite the positive momentum, a substantial appreciation of the JPY remains elusive, with expectations that the Bank of Japan (BoJ) will maintain its ultra-dovish monetary policy due to government stimulus following a recent earthquake in Japan. This, coupled with declining inflation rates in Tokyo and weak wage data released earlier in the week, reinforces the belief that the BoJ is unlikely to exit the negative interest rates regime anytime soon.
Additionally, a generally optimistic sentiment in the equity markets restrains gains for the safe-haven JPY and lends some support to the USD/JPY pair. Investors exhibit caution ahead of the critical US Consumer Price Index (CPI) report, prompting a restrained approach before positioning for potential market shifts.
Technical Analysis: USD/JPY May Find Support Near Psychological Mark at 145.00
From a technical perspective, recent failures to breach the 146.00 mark suggest prudence in waiting for sustained strength beyond this level before anticipating further gains. Positive momentum observed in oscillators on the daily chart may propel the USD/JPY pair towards the 146.55-146.60 hurdle, with potential extension towards the 147.00 mark. A break above this level could encourage a challenge to the 100-day Simple Moving Average (SMA) in the 147.45-147.50 region.
Conversely, any potential decline may attract fresh buyers near the psychological support at 145.00. A convincing break below this level could expose the next support near the 144.65 horizontal zone, followed by the 144.20 area and the 144.00 round-figure mark. Further downside could lead the USD/JPY pair towards the 200-day SMA, currently situated near the 143.45-143.40 region. A sustained bearish trend may bring spot prices below the 143.00 mark, aiming for the 142.45 support level.