The Japanese Yen (JPY) has seen increased interest as geopolitical tensions rise, prompting a shift towards safe-haven assets. The Bank of Japan‘s (BoJ) recent hawkish stance, signaling potential adjustments to stimulus measures, further bolsters the appeal of the JPY. This comes as conflicts escalate in the Middle East, dampening investor risk appetite and contributing to a softer tone in equity markets.
In contrast, the US Dollar (USD) maintains a consolidative stance, confined within a familiar range over the past two weeks. The USD/JPY pair faces headwinds as the US Treasury bond yields experience a modest decline. However, the cautious sentiment prevails as traders await the upcoming two-day Federal Open Market Committee (FOMC) meeting starting on Tuesday.
The uncertainty over the timing of the first interest rate cut and reduced odds for aggressive policy easing by the Federal Reserve (Fed) limit significant USD depreciation. Despite the weaker Tokyo Core Consumer Price Index (CPI) released on Friday, questions surrounding the Bank of Japan’s stance on negative interest rates linger.
Analysts suggest that the market may witness a wait-and-see approach before confirming any shift in the recent uptrend of the USD/JPY pair. The resilience of the USD is evident, with the possibility of a meaningful slide contingent on relevant macro data and the outcome of the FOMC meeting.
Daily Digest: Market Movers
The Japanese Yen sees an uptick driven by BoJ’s hawkish tilt and escalating Middle East conflicts.
USD remains resilient, holding near its highest level since December 13, impacting USD/JPY dynamics.
Traders adopt a cautious stance ahead of the crucial two-day FOMC meeting starting on Tuesday.
US macro releases, including Nonfarm Payrolls (NFP) on Friday, add to the week’s significance.
Technical Analysis: USD/JPY in Consolidation Mode
Technical analysis of the USD/JPY pair indicates a consolidation phase, with last week’s failure to breach the 100-day Simple Moving Average (SMA) supporting prospects for additional gains. Oscillators on the daily chart remain comfortably positive, signaling a bullish outlook.
Bulls may look for follow-through buying beyond the multi-week top at around 148.80 before anticipating a further near-term appreciation towards the 149.30-149.35 intermediate hurdle and the psychological mark of 150.00.
On the downside, the 100-day SMA around 147.55 is expected to act as immediate support. Further declines may attract buyers near the 147.00 round figure, limiting the downside near the 146.45 area or last week’s swing low. A break below the latter could shift the near-term bias in favor of bears, potentially pushing the pair towards the 146.10-146.00 horizontal support. Extended downward movement could target the 145.30-145.25 area before reaching the psychological level of 145.00.