- The Japanese yen retreats after touching a week's high against its American counterparts.
- The rise in bets on the impending BOJ rate rise this year should limit JPY's deeper losses.
- The narrowing difference in US yields could also support a lower JPY.
The Japanese Yen (JPY) has been depressed throughout the early European sessions on Tuesday, but it lacks a bearish conviction amid growing acceptance of the Bank of Japan (BOJ) raising interest rates further. Furthermore, recent narrowing of yield differences between the US and Japan led by bets for additional interest rate reductions by the Federal Reserve has contributed to limiting the losses of low Zilled JPY.
That said, President Donald Trump's optimism over delays in the implementation of mutual tariffs and consultations, aimed at ending the Russian-Ukurein War, aims to undermine the demand for safe haven JPY. Separately, the US Treasury's goodwill picks on bond yields support the US dollar (USD), snapping a three-day defeat to a two-month low, and bid tone surrounding the USD/JPY pair. I continue to support it.
Japanese Yen holds negative bias amid US bond yields, moderate US dollar strength pickup
- US President Donald Trump said Thursday that he plans to announce mutual tariffs aimed at all countries that charge obligations on US imports.
- Furthermore, optimism over US-Russia talks aimed at ending the war in Ukraine has fueled investors' trust and weakened demand for the safe haven Japanese yen on Tuesday.
- Against the backdrop of strong inflation from Japan, solid fourth quarter domestic production (GDP) released on Monday solidified the incident of an imminent interest rate hike from the Bank of Japan this year.
- The market is currently priced at an increase worth around 37 basis points by December, bringing the yield on Japanese government bonds to the highest level since April 2010, which has been the highest in the benchmark decade.
- Meanwhile, a surprising drop in US retail sales and a mixed signal on inflation suggests that the Federal Reserve could cut interest rates at policy meetings in September or October.
- Philadelphia Fed President Patrick Harker said Monday that the labor market is largely balanced and that the current economy is claiming stable policies due to the sticky inflation in recent months.
- Michelle Bowman, a member of the Fed Committee, said high asset prices could be hampering progress with inflation, and certainty is needed for lower inflation before lowering interest rates.
- Fed committee member Christopher Waller said that inflation progress last year was unbearably slow and that rate reductions would be appropriate in 2025 if inflation repeats the 2024 pattern.
- Nevertheless, Fed fund futures have seen a 40 basis points FED rate reduction in 2025, causing a recent decline in US Treasury bond yields, contributing to narrowing the gap between the US and Japan rates. Masu.
- Traders are turning to the release of the Empire State Manufacturing Index from the US. This will promote the US dollar and USD/JPY pair, along with speeches from influential FOMC members.
USD/JPY Bears have an advantage and have an SMA hurdle of less than 200 days near the 152.65 area
From a technical point of view, the failures near the 50% retracement level of the legs below last January-February and the slides below the very important 200-day simple moving average (SMA) afterwards are bearish. I like traders. Furthermore, the oscillators on the daily chart are kept in the negative region, suggesting that the path with the least resistance of the USD/JPY pair is on the negative side. So if you rise further towards the 152.00 mark, you should be capping spot prices near the 152.65 region (200-day SMA). This is followed by a 100-day SMA, currently being peged near the 153.15 region. This will have a short cover rally above the 154.00 mark, towards the supply zone of 154.45-154.50, towards the supply zone of 154.45-154.50, at about 154.75, towards the supply zone of 154.45-154.50, at about 154.75. It may trigger. -154.80 region.
On the back, it appears to be serving as immediate support before the 151.25 area, or Asian sessions low, zone 151.00-150.90, or the valley of the year touched earlier this month. A compelling break below the latter would expose a psychological mark of 150.00. Some follow-through sales will need to open roads on the way to the 149.60-149.55 region on the way to the 149.00 round figure and head to the December 2024 swinglow around the 148.65 region.
FAD FAQ
US monetary policy is shaped by the Federal Reserve System. The Fed has two missions. To achieve price stability and promote full employment. The main tool to achieve these goals is adjusting interest rates. When prices rise rapidly and exceed the Fed's 2% target, interest rates rise and borrowing costs for the entire economy. This makes the US dollar (USD) stronger as the US has become a more attractive place. If inflation rates fall below 2% or unemployment rates are too high, the Fed may lower interest rates and encourage borrowing.
The Federal Reserve holds eight policy meetings per year, where the Federal Open Market Committee (FOMC) assesses the economic situation and makes monetary policy decisions. The FOMC has 12 federal officials. Seven members of the Governor's Committee, the president of the Federal Reserve Bank of New York, and four of the remaining 11 Regional Reserve Bank presidents will take part. .
In extreme circumstances, the Federal Reserve can rely on a policy called Quantitative Liberty (QE). QE is a process that dramatically increases the credit flow in the financial system where the Fed has been stuck. This is a non-standard policy measure used during a crisis or when inflation is very low. This was the weapon chosen by the Fed during the 2008 big money crisis. This includes the Fed printing more dollars and using them to purchase high-quality bonds from financial institutions. QE usually weakens the US dollar.
Quantitative tightening (QT) is the reverse process of QE, with the Federal Reserve halting the purchase of bonds from financial institutions and not reinves principal from mature bonds to buy new bonds. It is usually positive about the value of the US dollar.
Customs FAQ
Duties are customs duties imposed on the import or product category of a particular product. Tariffs are designed to help local producers and manufacturers become more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as a tool for protectionism, along with trade barriers and import allocations.
Although both tariffs and taxes generate government revenue to fund public goods and services, there are several distinctions. Customs duties are paid upfront at the port of entry, but taxes are paid at the time of purchase. Taxes are levied on individual taxpayers and businesses, and customs duties are paid by the importer.
There are two ways of thinking among economists regarding the use of customs duties. Some argue that tariffs are necessary to protect domestic industries and address trade imbalances, but others could raise them high in the long term, and the Tat's tariffs Some view it as a harmful tool that could damage the trade war by encouraging it.
During preparations for the November 2024 presidential election, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of the total US imports. During this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. So when Trump imposes tariffs, he wants to focus on these three countries. He will also use the revenue generated through tariffs to reduce personal income tax.
