In the wake of a devastating earthquake in central Japan and a series of economic setbacks, the Japanese Yen (JPY) has continued its decline against the US Dollar (USD) for the third consecutive day, reaching its lowest point since early December. The Bank of Japan‘s (BoJ) plan to shift away from its ultra-dovish policy stance has been delayed due to falling rates of inflation in Tokyo and weak wage data, further undermining the JPY.
The USD/JPY pair is edging closer to the 148.00 round figure, fueled by continued USD buying and the widening US-Japan rate differential. The hawkish remarks by Federal Reserve Governor Christopher Waller have diminished expectations for a rate cut in March, supporting elevated US Treasury bond yields.
Geopolitical tensions and China’s economic challenges are affecting investor sentiment, though they have failed to benefit the safe-haven JPY. The USD/JPY pair remains positively influenced, trading beyond the 100-day Simple Moving Average (SMA). Traders are now awaiting the release of US monthly Retail Sales and Industrial Production figures for potential market impetus during the early North American session.
Scheduled speeches by influential FOMC members and movements in US bond yields will also influence USD demand and create short-term trading opportunities. Attention will then turn to Japan’s National Core CPI, set to be released on Friday, as it plays a crucial role in shaping the JPY’s near-term trajectory ahead of the BoJ decision next Tuesday.
Despite ongoing uncertainties, the fundamental backdrop suggests an upward trend for the currency pair. Technical analysis indicates that a sustained strength beyond key resistance levels could trigger further bullish momentum, potentially testing the 148.50 hurdle and aiming for higher psychological marks and supply zones.
However, corrective declines are seen as buying opportunities, with pivotal support around the 147.00 mark. A convincing break below this level could shift sentiment, exposing lower support zones and the 200-day SMA, currently positioned around the 143.75-143.70 area. The overall analysis supports the notion of continued upside potential for the USD/JPY pair, extending the uptrend observed since the beginning of the month.