- The Japanese Yen weakens a bit against the USD on Tuesday, albeit lacks follow-through.
- Bets that the BoJ will exit the negative interest rates regime should help limit further losses.
- Dovish Fed expectations cap the USD recovery and should act as a headwind for USD/JPY.
The Japanese Yen (JPY) kicks off the new year on a weaker note in the wake of a devastating earthquake in central Japan on Monday. Apart from this, a modest US Dollar (USD) strength, bolstered by a further rise in the US Treasury bond yields, remains supportive of the bid tone surrounding the USD/JPY pair through the first half of the European session. That said, the divergent expectations about the future policy action by the Bank of Japan (BoJ) and the Federal Reserve keep a lid on any further gains for the major.
Market players seem convinced that the Bank of Japan (BoJ) will exit its ultra-loose policy and lift interest rates into positive territory by the first half of 2024. The current pricing suggests a strong possibility of such an action in April, after the annual wage negotiations in March. In contrast, the Federal Reserve (Fed) is anticipated to start cutting interest rates as early as March 2024. Dovish Fed expectations, meanwhile, should cap the US bond yields and the buck, which, in turn, favours the JPY bulls and caps the USD/JPY pair.
Furthermore, geopolitical risks and concerns about fragile economic recovery in China validate the positive outlook for the safe-haven JPY. Traders, meanwhile, seem reluctant to place directional bets ahead of the FOMC minutes on Wednesday and this week's important US macro releases, including the closely-watched monthly employment details (NFP) report on Friday. Hence, it will be prudent to wait for strong follow-through buying before confirming that the USD/JPY pair has bottomed out and positioning for further gains.
Daily Digest Market Movers: Japanese Yen remains depressed against USD, lacks follow-through
- The Japanese Yen snaps a three-day winning streak against the US Dollar on Tuesday in reaction to a 7.6 magnitude earthquake on Monday that led to a 1.2-meter tsunami.
- Bets that the Bank of Japan (BoJ) will exit its ultra-loose policy and lift interest rates into positive territory by the first half of 2024 should continue to act as a tailwind for the JPY.
- Geopolitical risks stemming from the war in Ukraine and in the Middle East, and China's economic woes might further contribute to limiting deeper losses for the safe-haven JPY.
- US forces struck back against the Iran-backed Houthi group in the Red Sea in response to a series of strikes on several military and commercial vessels in the region.
- The official Chinese PMI released over the weekend indicated a further deterioration in manufacturing activity and little signs of recovery at the end of 2023.
- A private-sector survey, meanwhile, showed on Tuesday that China's factory activity expanded at a quicker pace in December but business confidence for 2024 remained subdued.
- The US Dollar builds on its recovery from a five-month low amid a further rise in the US Treasury bond yields and lends additional support to the USD/JPY pair.
- The yield on the benchmark 10-year US government bond recovered further from its lowest level since July touched last week and is seen underpinning the buck.
- Dovish Federal Reserve expectations should keep a lid on the ongoing USD recovery from its lowest level since late July and act as a headwind for the USD/JPY pair.
- The markets have priced in the possibility that the Fed will cut rates six times this year, starting as early as March, amid hopes for a soft landing for the economy.
- Traders now look to the key US macro data scheduled at the beginning of a new month, including the NFP report on Friday, for some meaningful impetus.
- Investors will further confront the release of FOMC meeting minutes on Wednesday, which will be scrutinized for cues about the timing of the first rate cut.
- This week's US economic docket also features the ISM Manufacturing PMI and JOLTS Job Openings on Wednesday, followed by the ADP report on Thursday.
Technical Analysis: USD/JPY could attract fresh sellers and remain capped near the 142.00 mark
From a technical perspective, the recent breakdown and acceptance below the 200-day Simple Moving Average (SMA) was seen as a fresh trigger for the USD/JPY bears. Moreover, oscillators on the daily chart are yet to signal oversold conditions and support prospects for deeper losses. Hence, any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out quickly ahead of the 142.00 round figure. That said, some follow-through buying could trigger a short-covering move and lift spot prices beyond the 142.40 intermediate hurdle, towards retesting the 200-day SMA breakpoint, currently near the 143.00 mark.
On the flip side, the 141.00 round figure could protect the immediate downside ahead of the multi-month low, around the 140.25 region touched last week, and the 140.00 psychological mark. The latter should act as a key pivotal point, which if broken decisively could make the USD/JPY pair vulnerable to accelerate the fall towards the 139.35 region en route to the 139.00 mark, the 138.75 area and the 138.00 mark (July 28 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 strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.07% | 0.03% | 0.00% | -0.03% | 0.17% | 0.15% | 0.12% | |
| EUR | -0.06% | -0.03% | -0.06% | -0.09% | 0.10% | 0.06% | 0.06% | |
| GBP | -0.03% | 0.03% | -0.02% | -0.09% | 0.15% | 0.10% | 0.07% | |
| CAD | -0.01% | 0.05% | 0.02% | -0.04% | 0.17% | 0.14% | 0.11% | |
| AUD | 0.03% | 0.09% | 0.05% | 0.03% | 0.20% | 0.17% | 0.15% | |
| JPY | -0.17% | -0.09% | -0.14% | -0.16% | -0.19% | -0.02% | -0.04% | |
| NZD | -0.13% | -0.06% | -0.09% | -0.14% | -0.18% | 0.04% | -0.08% | |
| CHF | -0.13% | -0.03% | -0.06% | -0.10% | -0.16% | 0.09% | 0.03% |
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).
Economic Indicator
United States Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
Read more.Why it matters to traders
America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.