The Japanese Yen (JPY) has seen a second consecutive day of strength against the US Dollar (USD), rebounding from a one-month low. Despite this, the Yen’s gains lack substantial follow-through. The aftermath of a New Year’s Day earthquake, declining inflation rates in Tokyo, and weak wage growth data have contributed to speculation that the Bank of Japan (BoJ) might delay its plan to shift away from an ultra-dovish stance.
Geopolitical risks and concerns over China’s economic challenges continue to support the JPY’s safe-haven status. Meanwhile, the subdued performance of the US Dollar exerts downward pressure on the USD/JPY pair. Despite somewhat higher US consumer inflation figures and hawkish comments from Federal Reserve (Fed) officials, market expectations for a rate cut at the March FOMC policy meeting persist.
While this contributes to USD weakness, reduced expectations for more aggressive policy easing by the Fed provide some support to US Treasury bond yields, helping to limit significant downside for the USD/JPY pair.
Given this mixed fundamental backdrop, cautious market participants are awaiting strong follow-through selling before establishing fresh bearish positions, confirming that the recent recovery from a multi-month low has lost momentum.
Looking at technicals, the USD/JPY pair is currently near the 145.00 psychological level, testing the 50% Fibonacci retracement of this week’s move-up. A sustained break below this level and the 100-hour Simple Moving Average (SMA) around 144.80 could trigger further bearish momentum. The next key support levels include the 61.8% Fibonacci retracement around 144.55 and the 144.10-144.00 region.
On the upside, immediate resistance is seen in the 145.55-145.60 horizontal zone, followed by the 146.00 round figure. A sustained move beyond 146.00 could pave the way for a challenge of the monthly peak around 146.40. Further bullish momentum might target the 147.00 mark and then challenge the 100-day SMA near 147.45.
The USD/JPY pair remains in focus as traders await the release of the US Producer Price Index (PPI) and a speech by Minneapolis Fed President Neel Kashkari for potential market-moving cues. Despite the mixed signals, the currency pair is poised to end the week with gains for the second consecutive week.