The Japanese Yen (JPY) has shown resilience against the US Dollar (USD) following a slight retreat from a one-week high, sustaining its gains into the European session on Wednesday. This shift is attributed to Bank of Japan (BoJ) Governor Kazuo Ueda’s reaffirmation on Tuesday regarding the commitment to achieving the 2% inflation target, signaling potential normalization of monetary policy conditions.
The BoJ’s optimism, despite a downward revision in its core consumer price forecast for fiscal 2024, hints at a cautious approach to tightening the ultra-loose policy. While geopolitical tensions from the Middle East and concerns about a slowdown in China’s post-COVID economic recovery contribute to the Yen’s safe-haven appeal, diminished expectations for aggressive policy easing by the Federal Reserve (Fed) favor the USD.
Traders are exercising caution and refraining from aggressive directional bets as they await crucial US macro data scheduled for later in the week. The week’s highlights include flash PMIs, the Advance Q4 GDP print, and the Core PCE Price Index, all of which are expected to influence the USD/JPY pair.
In related developments, Japan’s exports witnessed a 9.8% rise from a year earlier, with notable increases in exports to China and the US. Additionally, the au Jibun Bank flash Japan Manufacturing PMI and Services PMI displayed marginal improvements, though the former remained in contraction territory for the eighth consecutive month.
As global economic uncertainties persist, especially in China and Europe, and with the recent US military strikes in western Iraq, the safe-haven status of the Japanese Yen remains bolstered. Traders are closely monitoring global economic health through the release of flash PMI prints from the Eurozone and the US, while the focus will intensify on the upcoming Advance US Q4 GDP print and the US Core PCE Price Index later in the week.
Technical Analysis: USD/JPY in Familiar Trading Range
On a technical note, the USD/JPY pair is confined within a familiar trading range, maintaining support above the 100-day Simple Moving Average (SMA) around 147.55. Bullish traders are advised to exercise caution and await confirmation beyond the 148.80 region before anticipating further upward momentum. The next hurdles lie around the 149.30-149.35 zone and the psychological mark of 150.00. Conversely, a breach below the 147.55 support could expose the pair to further downside, with key levels at 146.60-146.55 and 146.10-146.00 coming into play. A decisive break below the latter would shift the bias in favor of bearish traders, negating the near-term positive outlook.