• Despite the risk-off drive and intervention fears, the Japanese Yen is unable to entice buyers.
• The BoJ’s cautious stance keeps the JPY weak and strengthens the USD/JPY exchange rate.
• The USD reached a multi-week high and gained momentum due to decreased expectations of a June Fed rate drop.

Tuesday marks the second day in a row that the Japanese Yen (JPY) has lost ground to its American counterpart, and as the European session begins, it is still hovering around a multi-decade low. The reluctance of the Bank of Japan (BoJ) to tighten policy further and its cautious attitude have proven to be major factors undermining the JPY. In addition, some sustained rise in the US dollar (USD) helps the USD/JPY pair draw in some dip buyers around the mid-151.00s.

However, given the recent scolding by Japanese authorities, the JPY’s downside is still restricted. This provides some support to the safe-haven JPY and may help to contain any significant upward movement in the USD/JPY pair, along with an overall softening tone in the equities markets. For new energy, traders now turn to the US data docket, which includes factory orders and JOLTS job openings, as well as comments from many powerful FOMC members.

 

Daily Digest Market Movers: The BoJ’s dovish outlook keeps undermining the Japanese yen

• The Japanese Yen has some support due to speculation that the government will interfere in the markets to strengthen the national currency, but any further gains are limited by the Bank of Japan’s cautious attitude.
• Japan’s Finance Minister Shunichi Suzuki said on Monday that he would react responsibly and would not rule out solutions against excessive volatility, reinforcing his caution regarding the recent fast changes in the value of the yen.
  The possibility of a further escalation of geopolitical tensions in the Middle East increases with reports that Israeli airplanes targeted Iran’s embassy in Syria. This might reduce investor appetite for risk assets and strengthen the safe-haven Japanese yen.
• After learning that the US manufacturing sector recovered in March, ending 16 months of contraction, the Institute for Supply Management said, investors reduced their wagers that the Federal Reserve would cut rates in June.
• Following the positive statistics, the yield on the benchmark 10-year US government bond and the rate-sensitive 2-year bond increased to a two-week high, which helped to boost the USD/JPY pair and drive the US Dollar to a seven-week high.
• For some significant encouragement later in the North American afternoon, traders now turn to the US data docket, which includes the release of JOLTS Job Openings and Factory Orders, as well as comments by significant FOMC members.
• Following the positive statistics, the yield on the benchmark 10-year US government bond and the rate-sensitive 2-year bond increased to a two-week high, which helped to boost the USD/JPY pair and drive the US Dollar to a seven-week high.
• For some significant encouragement later in the North American afternoon, traders now turn to the US data docket, which includes the release of JOLTS Job Openings and Factory Orders, as well as comments by significant FOMC members.

Technical Analysis: The USD/JPY pair may rise above the multi-decade peak in the vicinity of 152.00

Technically speaking, after a robust comeback from the March swing bottom, the range-bound price action that has been observed over the last two weeks or so may still be classified as a positive consolidation phase. Additionally, oscillators on the daily chart are still distant from being in the overbought zone and are remaining in the positive territory. This in turn confirms the USD/JPY pair’s favorable short-term outlook. Nevertheless, it will still be wise to hold off on positioning for any more appreciating move until after a move beyond a multi-decade high, centered around the 152.00 mark established last week.

On the other hand, a retreat towards the round number of 151.00 could now be viewed as a buying opportunity and be confined close to the horizontal resistance breakpoint of 150.85–150.80. However, some follow-through selling might reveal the next significant support in the vicinity of 150.25. The psychological mark of 150.00 is next in line, and if it is decisively broken, it could make the USD/JPY pair more susceptible to an acceleration of the corrective downturn into the 149.35–149.30 region, and ultimately to the 149.00 mark.