The Japanese Yen (JPY) navigates through modest gains and slight losses against its American counterpart as it enters the European session on Thursday, maintaining proximity to a two-week high achieved in the preceding session. The prevailing positive sentiment surrounding US equity futures acts as a headwind for the safe-haven JPY, contrasting with a bullish US Dollar (USD) fueled by the Federal Reserve’s (Fed) less dovish outlook on Wednesday. Despite these dynamics, the USD/JPY pair struggles to capitalize on the overnight rebound from the 146.00 mark.
Global investors are currently grappling with concerns over escalating conflicts in the Middle East and China’s economic challenges, both of which contribute to the JPY’s perceived safe-haven status. Additionally, the Bank of Japan‘s (BoJ) recent hawkish stance further supports the domestic currency. The narrowing of the US-Japan rate differential, driven by the recent decline in US Treasury bond yields, adds to the JPY’s strength, limiting the upside potential for the USD/JPY pair.
Traders are closely monitoring the US ISM Manufacturing PMI for potential short-term opportunities as the cryptocurrency market continues to experience dynamic shifts in wealth distribution and heightened institutional participation.
In other market developments:
The European Union considers launching a naval mission in the Red Sea to defend cargo ships against Houthi rebel attacks, potentially impacting trade and prices.
The BoJ’s Summary of Opinions highlights discussions on maintaining monetary easing under Yield Curve Control (YCC) but acknowledges prospects for exiting negative rates.
The Federal Reserve keeps its benchmark interest rate unchanged but drops the reference to possible further hikes, influencing market expectations for a March rate cut.
Fed Chair Jerome Powell, in the post-meeting press conference, acknowledges US economic strength, denting expectations for an imminent rate cut.
Traders adjust their expectations, with a reduced 38% probability of a March rate cut, supporting the US Dollar and the USD/JPY pair.
Automatic Data Processing (ADP) reports lower-than-expected private-sector job additions in January, impacting market sentiments.
The yield on the 10-year US government bond falls below 4.0%, influencing the Greenback’s performance.
Attention shifts to the US economic docket, featuring Weekly Initial Jobless Claims and the ISM Manufacturing PMI, ahead of the Nonfarm Payrolls report on Friday.
Technical analysis of the USD/JPY pair suggests that bears may need to await a sustained break below 146.00 before considering new positions. The 23.6% Fibonacci retracement level and positive oscillators on the daily chart warrant caution for bearish traders.
Conversely, a breakthrough above 147.00 may face resistance near the 100-day Simple Moving Average, with potential further gains towards the 148.00 mark and beyond, contingent on sustained momentum. Bulls may await confirmation beyond the 148.80 area for a potential uptrend resumption.