- The Japanese yen continues to weigh on the Japanese yen as expectations for a December interest rate hike by the Bank of Japan fade.
- Rising US bond yields and positive risk trends also undermine demand for the safe-haven Japanese yen.
- However, investors appear to be reluctant ahead of this week's important FOMC/BOJ policy meeting.
The Japanese yen (JPY) continues to struggle to attract meaningful buyers, hovering near three-week lows against the US yen heading into European trading on Tuesday. Increasing expectations that the Bank of Japan (BOJ) will keep short-term interest rates on hold later this week and positive risk trends continue to weaken the safe-haven yen. Added to this, expectations for a less dovish Federal Reserve remain supportive of rising US Treasury yields, another factor weighing on the low-yielding yen. It turned out that.
However, yen bears are currently reluctant to bet aggressively and appear to be choosing to stay on the sidelines in the face of major central bank event risk. The Fed is expected to announce its policy decision on Wednesday, followed by the Bank of Japan on Thursday. Meanwhile, a bullish US dollar (USD) will provide a tailwind for the USD/JPY pair. Traders are now eyeing U.S. retail sales for short-term momentum. Nevertheless, the fundamentals suggest that the path of least resistance for the yen is to the downside, supporting the prospect of further upside for the currency pair.
Japanese yen struggles to attract buyers amid Bank of Japan uncertainty
- Expectations that the Bank of Japan will leave interest rates unchanged at the end of its two-day meeting on Thursday continued to push the yen lower, pushing the USD/JPY pair to a three-week high on Monday.
- Japan's Minister of Economy, Trade and Industry Yoshinari Akazawa said this Tuesday that the Bank of Japan and the government are working together to manage appropriate monetary policy, and that the details of monetary policy should be handled by the central bank.
- The benchmark 10-year Treasury yield rose to its highest level since Nov. 22 on data showing large parts of the U.S. economy are expanding at the fastest pace in more than three years.
- S&P Global News U.S. Services Purchasing Managers' Index (PMI) rose to 58.5 from 56.1 in December, the highest level in 38 months, and the composite PMI rose to 56.6, the highest level in 33 months, from 54.9 in November. did.
- This masks the decline in December's preliminary US manufacturing PMI to 48.3, the lowest level in three months, and markets believe the Federal Reserve is likely to signal a slowdown in the pace of policy easing going forward. I reconfirmed my point of view.
- According to CME Group's FedWatch tool, the market has fully priced in the Fed's 25 basis point rate cut on Wednesday, which will keep the USD bulls on the defensive and USD/JPY. The upper limit will be determined.
- Traders are now anxiously awaiting the release of US monthly retail sales data, which, along with US Treasury yields, will drive demand for the US dollar and create near-term opportunities for the currency pair.
- However, attention remains riveted on the outcome of Wednesday's much-anticipated FOMC meeting and the Bank of Japan's key decision on Thursday, which should provide new direction stimulus for the yen.
USD/JPY technical setup supports prospects for further upside
From a technical perspective, Monday's breakout of the November-December 61.8% Fibonacci retracement level from its multi-month peak and acceptance above the 154.00 cut mark is an important trigger for bulls. may be considered. Moreover, the oscillator on the daily chart has just started gaining positive traction, supporting the prospects of further upside for the USD/JPY pair. Therefore, a follow-through buy above the overnight swing high, 154.45-154.50 area, should pave the way for a move towards a recovery of the 155.00 psychological mark. This momentum could further build towards the next relevant hurdle near the mid-155.00s on the way to the 156.00 mark and 156.25 resistance zone.
Conversely, Fibo is 61.8%. The resistance breakpoint near the 153.65 area now appears to be protecting the immediate downside ahead of the overnight low near 153.35. This is followed by the 153.00 mark, below which the USD/JPY pair could accelerate its decline towards the all-important support of the all-important 200-day simple moving average (SMA) around 152.10-152.00. A solid break below the latter could shift the bias in favor of bearish traders and drag the spot price all the way to the 151.00 round figure on its way to the psychological mark of 150.00.
This month's USD PRICE
The table below shows the percentage change of the US dollar (USD) against major currencies this month. The US dollar was the strongest against the Australian dollar.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.52% | 0.13% | 1.77% | 1.80% | 2.43% | 2.30% | 1.45% | |
| EUR | -0.52% | -0.40% | 1.21% | 1.28% | 1.90% | 1.76% | 0.92% | |
| GBP | -0.13% | 0.40% | 1.58% | 1.67% | 2.30% | 2.17% | 1.32% | |
| JPY | -1.77% | -1.21% | -1.58% | 0.05% | 0.66% | 0.52% | -0.31% | |
| CAD | -1.80% | -1.28% | -1.67% | -0.05% | 0.61% | 0.48% | -0.34% | |
| australian dollar | -2.43% | -1.90% | -2.30% | -0.66% | -0.61% | -0.13% | -0.96% | |
| new zealand dollar | -2.30% | -1.76% | -2.17% | -0.52% | -0.48% | 0.13% | -0.83% | |
| swiss franc | -1.45% | -0.92% | -1.32% | 0.31% | 0.34% | 0.96% | 0.83% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select USD from the left column and move along the horizontal line to Japanese Yen, the percentage change displayed in the box represents USD (base)/JPY (estimate).
