The Japanese Yen (JPY) experienced a notable rebound, bouncing back from a year-to-date low and reaching a fresh daily peak against the US Dollar (USD) as it heads into the European session on Monday. The Bank of Japan‘s (BoJ) shift towards a more hawkish stance, signaling favorable conditions for reducing substantial stimulus measures and pulling short-term rates out of negative territory, has played a significant role in supporting the JPY.
Geopolitical tensions, particularly those arising from conflicts in the Middle East and concerns about China’s slowing growth, further contribute to the JPY’s appeal as a relative safe-haven currency.
Conversely, the US Dollar struggles to capitalize on its intraday uptick, facing resistance ahead of the 100-day Simple Moving Average (SMA) and hindering the USD/JPY pair’s upward momentum. Despite this, the growing consensus that the Federal Reserve (Fed) will maintain higher interest rates for an extended period supports a rise in US Treasury bond yields, providing a potential tailwind for the USD.
Caution is advised for bearish traders in anticipation of the release of the US ISM Services PMI during the early North American session. The optimism generated by China’s market stabilization pledge and upbeat US employment data is fading due to escalating geopolitical tensions, causing investors to seek refuge in the safe-haven Japanese Yen.
Recent reports suggest that Hamas is poised to reject a proposed Gaza ceasefire deal, adding to geopolitical concerns. On the economic front, a survey indicates robust business activity in Japan’s services sector, while the Bank of Japan remains optimistic about inflation outlook and a potential exit from negative interest rates.
Technical analysis of the USD/JPY pair reveals a struggle to surpass the multiple-tops resistance around 148.75-148.80. Bullish control may be established if this level is breached, with the possibility of aiming for the 149.00 round figure and intermediate resistance near 149.60-149.70. On the downside, the 148.00 mark acts as immediate support, while a break below the 147.60-147.55 zone could trigger technical selling, potentially pushing the pair below 147.00. Further declines might target the 146.75-146.70 region and extend towards 146.40, with sub-146.00 levels becoming a key area to watch based on last week’s swing low.