Japanese Yen bears look to seize control, flirt with 148.00 ahead of US macro data
|- The Japanese Yen is undermined by diminishing odds for an early interest rate hike by the BoJ.
- A modest USD uptick also lends support to USD/JPY, though the Fed uncertainty caps the upside.
- Traders also prefer to wait on the sidelines ahead of the BoJ and FOMC policy meetings next week.
The Japanese Yen (JPY) remains on the defensive heading into the European session on Thursday and hangs near the lower end of its weekly range amid reduced bets for an early interest rate hike by the Bank of Japan (BoJ). Apart from this, the prevalent risk-on environment is seen undermining the safe-haven JPY and acting as a tailwind for the USD/JPY pair. Traders, however, seem reluctant to place aggressive directional bets and might prefer to move to the sidelines ahead of next week's key central bank event risks.
The BoJ is scheduled to announce its policy decision on Tuesday, which will be followed by the outcome of the two-day FOMC meeting on Wednesday. In the meantime, the outcome of Japan’s spring wage negotiations indicated that most firms have agreed to the trade unions' wage rise demands, paving the way for an imminent shift in the BoJ's policy stance. Furthermore, growing acceptance that the Federal Reserve (Fed) will start cutting interest rates in June might keep a lid on any further gains for the buck and the USD/JPY pair.
Daily Digest Market Movers: Japanese Yen bulls shrug off positive Japan wage hike data
- Japan's biggest companies responded to the Union's wage hike demand in full, clearing the way for the Bank of Japan to end its negative interest rates as early as next week and underpinning the Japanese Yen.
- Adding to this, Japan's largest industrial union UA Zensen said on Thursday that an average pay rise offered by 231 service-sector firms reached the biggest on record since 2013.
- Japanese media reported that more BoJ policymakers are backing the idea of a policy shift at the upcoming policy meeting as pay hikes by major companies bring the 2% price stability target within reach.
- According to people familiar with the matter, the assessment of BoJ officials is that the central bank is close to liftoff, regardless of whether the first rate hike since 2007 comes in March or April policy meeting.
- That said, the BoJ Governor Kazuo Ueda said earlier this week that the central bank will seek an exit from easy policy when achievement of 2% inflation is in sight, cooling bets for an early interest rate hike.
- Bank of Japan Governor Kazuo Ueda will likely take his time normalising ultra-loose monetary policy after ending negative interest rates, former central bank executive Hideo Hayakawa said on Thursday.
- An Israeli attack hit a UN aid distribution centre in Rafah, while Lebanon’s Hezbollah said two of its fighters were killed in the Bekaa Valley after Israel launched attacks on the area for a second straight day.
- A report from US news site Politico says that senior US officials have told their Israeli counterparts that the Biden administration will support the targeting of high-value Hamas targets in and underneath Rafah.
- The slightly warmer US consumer inflation released on Tuesday fuelled speculations that the Federal Reserve might stick to its higher for longer narrative, though the markets are still pricing in a rate cut in June.
- This keeps the US Dollar bulls on the defensive and does little to provide any meaningful impetus to the USD/JPY pair as traders remain on the sidelines ahead of the BoJ and FOMC monetary policy meetings next week.
- In the meantime, Thursday's release of US macro data – Retail Sales, Producer Price Index (PPI) and Weekly Initial Jobless Claims – might produce short-term trading opportunities ahead of the key central bank event risks.
Technical Analysis: USD/JPY nees to find acceptance above the 148.00 mark for bulls to seize control
From a technical perspective, the USD/JPY pair has been showing some resilience below the 38.2% Fibonacci retracement level of the December-February rally. The subsequent move up, however, struggled to find acceptance above the 100-day Simple Moving Average (SMA) and faltered ahead of the 23.6% Fibo. level. Moreover, oscillators on the daily chart are still holding deep in the negative territory and are still away from being in the oversold zone, suggesting that the path of least resistance for spot prices is to the downside.
That said, any further decline is likely to find some support near the overnight low, around the 147.25-147.20 area, ahead of the 147.00 mark and the 146.80 zone (38.2% Fibo.). This is closely followed by the 146.50-146.45 region, or the monthly trough, and the 200-day SMA, currently near the 146.30 region. Some follow-through selling, leading to a subsequent break below the 146.00 mark will be seen as a fresh trigger for bearish traders and drag the USD/JPY pair to mid-145.00s (50% Fibo.) en route to the 145.00 psychological mark.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.13% | 0.06% | 0.07% | 0.14% | 0.17% | 0.06% | 0.14% | |
| EUR | -0.12% | -0.04% | -0.06% | 0.01% | 0.06% | -0.06% | 0.04% | |
| GBP | -0.06% | 0.07% | 0.00% | 0.08% | 0.11% | 0.00% | 0.08% | |
| CAD | -0.07% | 0.07% | 0.00% | 0.07% | 0.11% | 0.00% | 0.10% | |
| AUD | -0.14% | -0.04% | -0.11% | -0.07% | 0.03% | -0.06% | 0.00% | |
| JPY | -0.18% | -0.06% | -0.11% | -0.11% | 0.00% | -0.12% | -0.02% | |
| NZD | -0.05% | 0.07% | -0.01% | 0.01% | 0.09% | 0.11% | 0.11% | |
| CHF | -0.14% | -0.04% | -0.08% | -0.08% | 0.00% | 0.01% | -0.08% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Japanese Yen FAQs
What key factors drive the Japanese Yen?
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
How do the decisions of the Bank of Japan impact the Japanese Yen?
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
How does the differential between Japanese and US bond yields impact the Japanese Yen?
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
How does broader risk sentiment impact the Japanese Yen?
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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