- The Japanese Yen recovers a bit from the YTD low amid the BoJ’s hawkish tilt and geopolitical risks.
- The USD stalls the post-NFP rally to a nearly two-month peak and exerts some pressure on USD/JPY.
- Rising US bond yields support prospects for additional USD gains and should lend support to the pair.
The Japanese Yen (JPY) rebounds after hitting a fresh YTD low and climbs to a fresh daily peak against its American counterpart heading into the European session on Monday. The Bank of Japan's (BoJ) hawkish tilt, saying that conditions for phasing out huge stimulus and pulling short-term rates out of negative territory were falling into place, turns out to be a key factor lending some support to the JPY. Adding to this, persistent worries about geopolitical tensions stemming from conflicts in the Middle East, along with concerns about slowing growth in China, further benefits the JPY's relative safe-haven status.
The US Dollar (USD), on the other hand, struggles to capitalize on its intraday uptick to the highest level since December 11 and fails ahead of the 100-day Simple Moving Average (SMA), which contributes to capping the USD/JPY pair. That said, growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer remains supportive of a further rise in the US Treasury bond yields and should act as a tailwind for the buck. This, in turn, warrants caution for aggressive bearish traders ahead of the release of the US ISM Services PMI, due later during the early North American session.
Daily Digest Market Movers: Japanese Yen attracts some haven flows amid rising geopolitical risks
- The optimism over China's pledge to stabilise markets and the upbeat US employment data on Friday, which pointed to a resilient economy, fades quicky amid geopolitical tensions and benefits the safe-haven Japanese Yen.
- China Securities Regulatory Commission said on Sunday that it would guide more medium- and long-term funds into the market and crack down on illegal activities including malicious short selling and insider trading.
- The headline NFP showed that the US economy added 353K jobs in January, smashing market expectations for 180K, and the previous month's reading was also revised higher to 333K from 216K reported initially.
- Other details revealed that the Unemployment Rate held steady at 3.7% and wage inflation, as measured by the change in Average Hourly Earnings, rose to 4.5% on a yearly basis as against the 4.1% rise anticipated.
- The data dimmed hopes for a near-term rate cut by the Federal Reserve, with the probability of such a move at the May FOMC meeting now standing at about 70%, down from 90% before the crucial jobs report.
- Expectations that the Fed will keep interest rates higher for longer continue to push the US Treasury bond yields higher, which favours the US Dollar bulls and should continue to lend support to the USD/JPY pair.
- Media reports suggest that Hamas is set to reject the Gaza ceasefire deal proposed in Paris and Israel's Prime Minister Benjamin Netanyahu said that the country will not end the war before it completes all of its goals.
- A survey on Monday showed that business activity in Japan's services sector, which accounts for around 70% of the country's gross domestic product (GDP), expanded at the strongest pace since September.
- In fact, the au Jibun Bank Service PMI was revised up and finalized at 53.1 for January, marking the 17th consecutive month of growth, as against the flash reading of 52.7 and 51.5 in the previous month.
- The Bank of Japan has become more bullish on its inflation outlook due to rising momentum for wage increases and growth in service sector prices, strengthening the case for an imminent exit from negative interest rates.
- The US ISM Services PMI is due for release later today and is expected to improve from 50.6 to 52.0 in January, which, along with the US bond yields and the broader risk sentiment, should provide some impetus.
Technical Analysis: USD/JPY once again fails near 148.80, bearish multiple-tops in the making
From a technical perspective, the USD/JPY pair needs to make it through the 148.75-148.80 multiple-tops resistance for bulls to seize near-term control. Given that oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone, some follow-through buying beyond the 149.00 round figure will be seen as a fresh trigger for spot prices. The subsequent move up should allow bulls to aim back to reclaim the 150.00 psychological mark with some intermediate resistance near the 149.60-149.70 region.
On the flip side, the 148.00 mark now seems to protect the immediate downside. Any further decline is more likely to attract fresh buyers and remain limited near the 100-day Simple Moving Average (SMA), currently pegged near the 147.60-147.55 zone. A convincing break below the latter, however, might prompt aggressive technical selling and drag the USD/JPY pair below the 147.00 mark, towards the next relevant support near the 146.75-146.70 region. The downfall could extend further towards the 146.40 zone en route to sub-146.00 levels, or last week's swing low.
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 | 0.03% | 0.11% | 0.05% | -0.01% | -0.05% | 0.06% | 0.08% | |
| EUR | -0.02% | 0.10% | 0.03% | -0.03% | -0.08% | 0.02% | 0.06% | |
| GBP | -0.11% | -0.08% | -0.06% | -0.13% | -0.16% | -0.07% | -0.04% | |
| CAD | -0.05% | -0.01% | 0.06% | -0.06% | -0.10% | -0.01% | 0.02% | |
| AUD | 0.01% | 0.05% | 0.13% | 0.07% | -0.04% | 0.07% | 0.08% | |
| JPY | 0.04% | 0.07% | 0.15% | 0.12% | 0.05% | 0.08% | 0.12% | |
| NZD | -0.07% | -0.01% | 0.07% | 0.01% | -0.07% | -0.12% | 0.02% | |
| CHF | -0.06% | -0.03% | 0.05% | -0.02% | -0.06% | -0.11% | 0.00% |
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).
Risk sentiment FAQs
What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
What are the key assets to track to understand risk sentiment dynamics?
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
Which currencies strengthen when sentiment is "risk-on"?
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
Which currencies strengthen when sentiment is "risk-off"?
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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