Japanese Yen Grabs a Bid, Emboldened by Bank of Japan Talk – DailyFX

USD/JPY analysis, charts, prices

JPY price,charts,analysis

• Verbal intervention from the central bank pushes up the Japanese yen.
• US PCE (13:30 UK) will be the next driver for USD prices.

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Hajime Takada, a board member of the Bank of Japan, said today that the central bank’s 2% inflation target is “finally in sight” and that “we need to consider changing gears from very strong monetary easing.” “We need to be agile,” he said. And be flexible towards the exit. This hawkish verbal intervention pushed the Japanese yen higher in trading, with USD/JPY hitting its lowest in nearly two weeks. According to current market expectations, there is a 61.5% probability of a 10 basis point rate hike at the April BOJ meeting, a 72% probability of a rate hike at the June meeting, and an 84% probability of the July meeting. .

The Japanese yen has strengthened, but the US dollar remains in a holding pattern ahead of today’s PCE inflation report. Core PCE year-on-year is expected to decline by 0.1% to 2.8% in January, while the PCE price index is expected to remain at 2.4% compared to 2.6% in December.

Core PCE is the Fed’s preferred measure of price pressure, and an increase in either key measure would add weight to the Fed’s current stance of keeping interest rates at current levels for an extended period of time. The US central bank has been successful in tempering expectations for aggressive rate cuts this year, with markets now in line with the Fed’s idea of ​​three 25 basis point rate cuts, with the first fully due at its July meeting. It’s woven into it.

Today’s verbal intervention is likely to keep the dollar/yen pair at the 151 level for the time being. A decline in USD/JPY is one of the market consensus trades for 2024, and while USD/JPY has risen so far this year, the path of least resistance seems likely to be lower. Today’s PCE report could push the USD higher if inflationary pressures continue, but this is likely to be a short-term move, especially now that markets are re-pricing a US interest rate cut. The recent highs and lows are concentrated below 149.00, and both the 50-day and 200-day simple moving averages protect the 145 level.

USD/JPY daily chart

According to data from individual traders, 25.73% of traders are net long, with a short to long ratio of traders at 2.89:1. The number of net-long traders is down 1.43% from yesterday and 2.28% from last week. Traders’ net short is 5.35% lower than yesterday and 3.41% lower than last week.

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