- USD/JPY comes under fresh selling pressure and is weighed down by a combination of factors.
- The risk-off mood benefits the safe-haven JPY and acts as a headwind amid a softer Greenback.
- The BoJ’s dovish policy decision on Wednesday warrants caution for aggressive bearish traders.
The USD/JPY pair extends the previous day's sharp retracement slide from the 131.55-131.60 area, or the weekly high and remains under some selling pressure on Thursday. The pair, however, recovers a few pips from the daily low and is currently placed just below mid-128.00s, still down nearly 0.50% for the day.
The prevalent risk-off mood - as depicted by a sea of red across the equity markets - benefits the safe-haven Japanese Yen and exerts some downward pressure on the USD/JPY pair. Investors remain concerned about headwinds stemming from the worst yet COVID-19 outbreak in China. This, along with the protracted Russia-Ukraine war, has been fueling worries about a deeper global economic downturn.
Furthermore, the weaker US economic data released on Wednesday sparks recession fears and weigh on investors' sentiment. Meanwhile, The anti-risk flow, along with bets for smaller Fed rate hikes, drag the yield on the rate-sensitive two-year US government bond to its lowest level since October. This keeps the US Dollar bulls on the defensive and fails to lend support to the USD/JPY pair.
The downside, however, seems limited, at least for the time being, in the wake of the Bank of Japan's (BoJ) dovish policy decision on Wednesday. In fact, the Japanese central bank maintained ultra-low interest rates and left its yield curve control measures unchanged, defying expectations for more hawkish signals. This, in turn, warrants caution for aggressive bearish traders and before positioning for the resumption of the recent downtrend witnessed over the past three months or so.
Market participants now look forward to the US economic docket, featuring the Philly Fed Manufacturing Index, the usual Weekly Initial Jobless Claims and housing market data. This, along with speeches by influential FOMC members and the US bond yields, will drive the USD demand and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities around the major.
Technical levels to watch
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 stabilizes near 1.0400 after upbeat US data
EUR/USD consolidates daily recovery gains near 1.0400 following the release of upbeat United States data. Q3 GDP was upwardly revised to 3.1% from 2.8% previously, while weekly unemployment claims improved to 220K in the week ending December 13.
GBP/USD extends slide approaches 1.2500 after BoE rate decision
GBP/USD stays on the back foot and break lower, nearing 1.2500 after the Bank of England (BoE) monetary policy decisions. The BoE maintained the bank rate at 4.75% as expected, but the accompanying statement leaned to dovish, while three out of nine MPC members opted for a cut.
Gold approaches recent lows around $2,580
Gold resumes its decline after the early advance and trades below $2,600 early in the American session. Stronger than anticipated US data and recent central banks' outcomes fuel demand for the US Dollar. XAU/USD nears its weekly low at $2,582.93.
Bitcoin slightly recovers after sharp sell-off following Fed rate cut decision
Bitcoin (BTC) recovers slightly, trading around $102,000 on Thursday after dropping 5.5% the previous day. Whales, corporations, and institutional investors saw an opportunity to take advantage of the recent dips and added more BTC to their holdings.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
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.