• The Japanese Yen remains on the defensive amid the BoJ policy uncertainty.
• The flash Japan PMIs do little to impress the JPY bulls or lend any support.
• Intervention fears help limit more profound losses amid subdued USD price action.

The Japanese Yen (JPY) ticks lower against its American counterpart for the second straight day on Thursday, albeit lacks follow-through and remains below mid-150.00s through the Asian session. Fears that Japanese authorities will intervene in the markets to support the domestic currency, along with the risk of a further escalation of geopolitical tensions in the Middle East, help limit losses for the JPY. Any meaningful appreciating move, however, still seems elusive amid speculations that the Bank of Japan (BoJ) is unlikely to pivot away from the decade-long accommodative regime in the coming months in the wake of a recession in Japan.

Furthermore, a generally upbeat tone around the equity markets could dent demand for the safe-haven JPY. Apart from this, the emergence of some dip-buying around the US Dollar (USD), bolstered by Wednesday’s hawkish FOMC meeting minutes, supports prospects for a further near-term appreciating move for the USD/JPY pair. Traders now look to the US economic docket – featuring the usual Weekly Initial Jobless Claims, the flash PMI prints, and Existing Home Sales data. This, along with Federal Reserve Governor Philip Jefferson’s speech and the US bond yields, might influence the USD and provide a fresh impetus to the USD/JPY pair.

Daily Digest Market Movers: Japanese Yen seems vulnerable amid reduced bets for BoJ policy shift

• The Japanese Yen is still being undermined by the recession, which also increased uncertainty over when the Bank of Japan will likely end its hostile interest rate policy.
• According to a private company poll that was made public on Thursday, a significant decline in new orders in February caused industrial activity in Japan to decline for the ninth consecutive month.
• The au Jibun Bank flash Japan Manufacturing PMI dropped from 48.0 in January to 47.2 in February, while the services sector gauge dropped from 53.1 to 52.5 in the same month.
• The manufacturing and service sectors are combined to form the Composite PMI, which decreased from 51.5 in January to 50.3 in February, indicating a stagnation in overall business activity.
• According to the survey, firms’ optimism about future output decreased in February, and the minor uptick shown in January vanished. This was the lowest level of optimism seen since January 2023.
• The Bank of Japan and the Ministry of Finance in Japan have issued a warning, stating that they are closely monitoring the currency rate and are prepared to step in and stabilize the market should the JPY continue to weaken.
• Even if authorities were worried about the risks of dropping rates too fast, as the minutes of the January FOMC meeting showed, the US Dollar is unable to draw in any significant purchasers.
• Bets that the Federal Reserve would maintain higher interest rates for a more extended period were reinforced by policymakers’ agreement that they needed more assurance that inflation would decline before considering lowering rates.
• The expectation among traders that the Fed will start reducing rates in June caused the US Treasury bond yields to rise on Wednesday due to a weaker 20-year bond auction and this expectation.
• The benchmark 10-year US government bond yield increased to its highest point since November 30, which is good news for USD bulls and gives the currency pair more support.

Technical Analysis: USD/JPY consolidates in a one-week-old range before the next leg up

Technically speaking, the price action that has been range-bound for the last week or two has formed a rectangle on short-term charts. In light of the most recent breach over the horizontal barrier between 148.70 and 148.80, this might still be considered a bullish consolidation phase. Additionally, oscillators on the daily chart continue to stay outside of the overbought zone and keep in the positive territory, confirming the optimistic outlook for the USD/JPY pair. However, before preparing for any additional gains, it will still be advisable to wait for some follow-through purchasing beyond the 150.85–150.90 range or a multi-month high reached last week. Spot prices may then rise to the multi-decade top reached in October 2022 and retested in November 2023, or the 151.45 intermediate obstacles on route to the 152.00 neighborhood.

Conversely, the psychological threshold of 150.00 appears to be guarding against further declines before the weekly low, which is located in the 149.70–149.65 range. Any additional weakness might draw some buyers in the vicinity of 149.25–149.20. The 149.00 round number and the resistance-turned-support area of 148.80–148.70 are the following. If they are forcefully broken, they will indicate that the USD/JPY pair has formed a near-term top and paved the way for a significant corrective downturn. The continuing decline may push spot prices down to the 148.35–148.30 zone on their way to the 148.00 level and the support of the 100-day Simple Moving Average (SMA) at 147.70.

Japanese Yen price this week

The Japanese Yen’s (JPY) percentage movement compared to the main currencies listed this week is displayed in the table below. The strongest currency against the Canadian dollar was the Japanese Yen.

Conclusion: Yen’s Journey and the Trader’s Quest

The Yen’s narrative against the USD is one characterized by struggle, but it also bears the hallmarks of resilience. As it teeters near weekly lows, the tale is far from over. The trader’s quest lies in deciphering the twists and turns of this narrative and illuminating the path ahead with astute analyses and informed decisions. In the grand morass of the Forex market, the Yen is but one enigma, a marker of the vast web of global economic interactions. With each flutter of its value, the market echoes with opportunity, challenge, and the unceasing quest for understanding.

For those versed in the art of Forex, the Yen’s dance with the USD offers a symphony of potential movements. It is a moment not just to observe but to immerse in the rhythms and cadences that define this most liquid market.

The future holds both the promise of volatility and the opportunities born of such tumult. As traders and analysts, our charge is precise: to chart a course that maximizes gains and minimizes risks, to read the tea leaves that are conjured by the winds of economic change, and to, in turn, influence the intricate pattern of the global financial quilt. The Yen’s place in this ever-evolving mosaic is secure, its struggle etched in the annals of Forex lore. It is for us, the participants of this grand theater, to play our part with discernment and skill.

Governor Kazuo Ueda of the Bank of Japan (BoJ) stated on Thursday that the country “will make appropriate monetary policy decisions, as Japan’s inflation trend is heightening.”

Additional quotes

The cost of services is still gradually increasing.

Anticipate a strengthening of the positive cycle, wherein a tight labor market results in more excellent salaries and household income.

It would be ideal for FX to move steadily in line with fundamentals.

We will not discuss FX levels.

Several things affect FX rates.

It would be ideal for FX to move steadily in line with fundamentals.

A 1% increase in interest rates will result in a value loss on BoJ’s JGB holdings of 40 trillion yen.

Market reaction

At 150.31, the USD/JPY exchange rate was essentially steady for the day.

Conclusion

Ueda’s emphasis on trend inflation heightening presents a turning point for understanding the Bank of Japan’s future moves. As we digest and analyze his insights, it’s evident that the intricate relationship between inflation and monetary policy wields tremendous influence on the global economy. Policymakers, economists, and analysts must now remain vigilant, as changes driven by Ueda’s viewpoint could have far-reaching effects, shaping a new chapter in global economic policy-making. This thorough examination of Ueda’s comments should serve as a starting point for deeper discussions and strategic planning, ensuring all stakeholders are aligned with these substantial shifts in policy focus.