- USD/JPY kicks off the week on a weak note due to several negative factors.
- Speculations of rate hikes from the BOJ and a slight dip in global risk appetite are favorable for the JPY.
- The unexpected downgrade of US credit ratings along with dovish expectations from the Fed impacts the US dollar.
The USD/JPY pair is seeing new selling pressure on Monday, falling below a week’s low around the 144.80 mark during the Asian trading hours. The overall environment suggests that the price is likely to continue heading downwards, maintaining the recent downward trend that started after reaching a six-week peak last Monday.
Increasing speculation that the Bank of Japan (BOJ) might raise interest rates again in 2025 supports the strength of the Japanese Yen (JPY). Additionally, the unexpected downgrade of the US government’s credit rating is prompting investors to lean towards safer assets like JPY, especially after Moody’s downgraded the US sovereign credit rating to “AA1” on Friday.
Meanwhile, there’s a growing belief that the Federal Reserve will take action to manage inflation, possibly cutting rates further as indicators suggest the US economy may slow down in the coming quarters. This could weaken the US dollar (USD) at the start of the week, adding more downward pressure on the USD/JPY pair. However, attention is needed as there hasn’t been a significant drop below the psychological level of 145.00, which could halt a deeper decline.
Looking ahead, there are no key economic indicators scheduled for release from the US on Monday. The overall risk sentiment will likely influence demand for JPY and affect the USD/JPY pair. Still, the divergent policies of the BOJ pose challenges for a short-term bearish outlook. Therefore, any recovery attempts could be viewed as potential selling opportunities, which may keep the market capped.
