The Japanese Yen (JPY) struggled to capitalize on a minor intraday gain against the US Dollar (USD) and retreated within the lower range during the first half of the European session on Tuesday. A positive sentiment in European equity markets contributed to the weakening of the JPY’s safe-haven status. Concurrently, the USD regained positive traction, assisted by repositioning trades ahead of the highly-anticipated two-day Federal Open Market Committee (FOMC) monetary policy meeting that commenced on Tuesday.
The USD/JPY pair rebounded approximately 40 pips from the daily trough of 147.15, reflecting the impact of the positive momentum in the USD.
Despite the optimistic market tone, concerns about a potential escalation of conflicts in the Middle East may temper overall optimism. Additionally, the Bank of Japan‘s (BoJ) recent hawkish stance could help mitigate losses for the JPY.
Uncertainty regarding the timing of interest rate cuts by the Federal Reserve (Fed) may restrain USD bulls from making aggressive moves, capping the upside potential for the USD/JPY pair. Traders are closely monitoring the US economic docket, which includes the Conference Board’s Consumer Confidence Index and JOLTS Job Openings data, for potential market cues ahead of the pivotal FOMC meeting.
In the broader context, the market is cautious about geopolitical risks, and the BoJ’s recent signals suggest a potential shift away from ultra-loose monetary policy. Japanese Prime Minister Fumio Kishida has expressed a commitment to bolster household income, addressing urgent economic issues.
Amidst geopolitical tensions, reports indicate that President Joe Biden is considering authorizing US military action in response to a drone attack near the Jordan-Syria border.
Technical analysis of the USD/JPY pair reveals a current trade around the 100-day Simple Moving Average (SMA) pivotal point. Analysts suggest that any decline below the 147.00 mark may find support near last week’s swing low of around 146.65. On the upside, the 147.65 area could pose an immediate obstacle, with subsequent hurdles at 148.00, 148.30-148.35, and the monthly peak near 148.80. Bullish momentum might be confirmed with sustained strength beyond these levels, potentially pushing the pair towards 149.00, 149.30-149.35, and the psychological milestone of 150.00.