Japanese Yen sticks to intraday negative bias; USD/JPY climbs to 156.00 neighborhood – FXStreet

• The Japanese yen has moved away from its one-month high against the US dollar hit on Tuesday.
• The divergence in policy expectations between the Bank of Japan and the Fed will help limit the yen's sharp depreciation.
• Traders may also choose to stay on the sidelines ahead of the Bank of Japan's meeting starting Thursday.

The Japanese yen (JPY) fell across the board during Wednesday's Asian session, along with the appearance of some US dollar (USD) buying, helping the USD/JPY pair rally for the first time in over a month I will do it. low. It turns out that the risk-on mood is the main factor undermining the safe-haven Japanese yen, as evidenced by the overall positive mood in the stock market. Separately, a gradual recovery in U.S. bond yields has supported stock prices, putting further pressure on the low-yielding Japanese yen.

But a meaningful yen depreciation still seems elusive, with expectations mounting that the Bank of Japan (BOJ) will raise interest rates at the end of its much-anticipated two-day policy meeting starting Thursday. Additionally, expectations that the Federal Reserve will cut interest rates twice this year could be a headwind for U.S. Treasury yields and the dollar. This will require some caution before confirming that the USD/JPY pair has formed a short-term bottom and positioned for further positive intraday movement.

Japanese yen bulls continue to take a wait-and-see approach amid positive risk tone

• Friday's impending interest rate hike buoyed optimism that higher wages will help Japan sustainably stay on track to meet its 2% inflation target, on the back of hawkish comments from Bank of Japan officials. This supports the outlook.
• Tomoko Yoshino, president of Rengo, Japan's largest labor union, agrees with the Bank of Japan's view that there is momentum for wage increases. The Bank of Japan has repeatedly stated that sustained and broad-based wage increases are a precondition for raising short-term interest rates.
• Prime Minister Shigeru Ishiba is expected to emphasize strong wage growth that outpaces inflation as a key element of his economic revitalization strategy in his policy speech to the Diet soon, according to government officials.
• Japan's largest business group, Keidanren, and labor unions began annual labor negotiations on Wednesday, with expectations for further significant wage increases, strengthening the case for a Bank of Japan interest rate hike.
• Markets are currently pricing in a more than 90% chance that the Bank of Japan will raise interest rates at the end of its two-day policy meeting on January 23 and 24, taking interest rates from 0.25% to 0.5%, the highest since the global interest rate rise in 2008. . financial crisis.
• US President Donald Trump told reporters on Monday that he is considering imposing 25% tariffs on imports from Canada and Mexico as early as early February, raising the possibility of universal tariffs. Also mentioned.
• Raising tariffs is often thought to hinder economic growth and increase inflation. However, President Trump did not reveal specific plans regarding tariffs. Additionally, officials said the new taxes would be levied carefully.
• Additionally, the U.S. Producer Price Index (PPI) and Consumer Price Index (CPI) have recently shown signs of slowing inflation, raising expectations that the Federal Reserve will implement two more interest rate cuts this year. There is.
• A modest rise in U.S. Treasury yields helps the dollar break off a two-week low and USD/JPY recover from Tuesday's more than one-month low of around 154.75.

USD/JPY may face resistance near 156.25 and could swing higher overnight

From a technical perspective, the USD/JPY pair is showing resilience below the psychological mark of 155.00 and the lower bound of a multi-month ascending channel. The subsequent rally, along with the fact that the oscillator on the daily chart has not yet gained significant negative traction, warrants some caution from bearish traders. Therefore, it is wise to wait for a sustained break and acceptance below trend channel support before positioning for further declines. The spot price may then accelerate its decline towards the 154.00 round numbers, the mid-153.00s, and the intermediate support at 154.50-154.45 on its way to the 153.00 mark.

Conversely, the round number of 156.00 closely followed the overnight swing high near 156.25, which now appears to be acting as an immediate hurdle ahead of the weekly high near 156.55-156.60 touched on Monday. Follow-through buying could push the USD/JPY pair towards the 157.00 mark. This momentum could further expand towards the 157.25-157.30 area on the way to the 157.60 area and 158.00 round numbers. Sustained strength above the latter could set the stage for a retest of the multi-month peak around 159.00 marked on January 10th.