• The Japanese Yen strengthened a bit in reaction to verbal intervention by Japanese authorities.
• The risk-off impulse further benefits the safe-haven JPY and exerts some pressure on USD/JPY.
• The hotter-than-expected US CPI reaffirms hawkish Fed expectations and favors the USD bulls.

Against the US dollar, the Japanese Yen (JPY) rose away from a two-month low set the day before and experienced some positive momentum during the Asian session on Wednesday. The Japanese authorities verbally intervened when a person’s psychological score fell above 150.00. This is one of the main reasons supporting the safe-haven JPY amid anticipation of an impending change in the Bank of Japan’s (BoJ) policy stance and an overall negative tone surrounding the equities markets. In addition, a slight decline in the US dollar (USD) puts some downward pressure on the USD/JPY pair.

Nevertheless, given the US economy’s continued resilience and persistent inflation, there is growing consensus that the Federal Reserve (Fed) will maintain higher interest rates for an extended period. This could continue to support the US currency. Elevated US Treasury bond yields are nevertheless supported by less betting on a more aggressive policy easing by the Fed. As a result, the US-Japan rate differential widened, which may limit future JPY appreciation and increase the likelihood of some dip buying in the USD/JPY pair. As a result, before planning for larger intraday losses, considerable care is advised.

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Daily Digest Market Movers: The Japanese Yen draws support from a combination of factors; the upside seems limited

• Following Japan’s top currency diplomat Masato Kanda’s reaffirmation that authorities are prepared to intervene in the foreign exchange market if necessary, the Japanese Yen pares back some of Tuesday’s post-US CPI decline to a three-month low.
• Japan’s Finance Minister Shunichi Suzuki also stated that the government is monitoring the market with even greater urgency and that swift foreign exchange movements are undesirable. Still, he made no mention of any interventions.
• Bloomberg reports that no bankers, legislators, government officials, or business executives have strongly objected to Bank of Japan Governor Kazuo Ueda’s proposal to raise interest rates for the first time since 2007.
• The Federal Reserve’s expectations for a more aggressive rate-cutting cycle were dampened by hotter-than-expected US inflation data, which raised the yield on US Treasury bonds and reduced market appetite for riskier assets.

• The headline US CPI increased by 0.3% in January compared to a 0.2% increase in December, while the YoY rate decreased to 3.1% from 3.4% in December, according to a report released Tuesday by the Labor Department’s Bureau of Labor Statistics.
• Alongside a better Core CPI print that increased 3.9% during the reported month, matching December’s gain and exceeding projections for 3.7%, the data was above market expectations for a reading of 2.9%.
• The likelihood of a rate cut in May has decreased to about 35% from over 60% the day before, and investors have all but priced in a rate cut in March. The Fed is now anticipated to begin lowering rates at the June policy meeting.
• The US Dollar hit a three-month-high, and the yield on the benchmark 10-year US government bond rose to its highest level since December 1, bolstering the likelihood that the USD/JPY pair will continue to appreciate.

Technical Analysis: USD/JPY could attract some dip-buying at lower levels; the 150.00 mark holds the key for bulls

Technically, the overnight significant move-up was viewed as a new catalyst for bulls and may have already paved the way for further increases. Nevertheless, some care is advised because the daily chart’s Relative Strength Index (RSI) is approaching the overbought area. However, any additional correction drop will probably draw new buyers near 150.30, which should keep losses on the USD/JPY pair under control close to 150.00. The latter is expected to serve as a crucial turning point that, should it be violated, might lead to some technical selling and push spot prices still lower into the 149.65–149.60 area.

Conversely, a multi-month peak touched on Tuesday, the 150.90 area, now appears to function as an immediate barrier. A prolonged uptrend might push the USD/JPY pair closer to the multi-decade top established in October 2022 and retested in November 2023, as well as the 151.45 intermediate hurdles on the way to the 152.00 neighborhood.

Japanese Yen price today

The percentage change of the Japanese Yen (JPY) against the major currencies listed today is displayed in the table below. When compared to the Canadian dollar, the Japanese Yen was the strongest.

Conclusion

The Japanese Yen’s decisive swing away from its year-to-date low is more than a mere currency movement — it’s a testament to the multifaceted impact of global drivers and the intricacies of financial markets. The current climate presents a tapestry of challenges and opportunities for the forex savvy, demanding a blend of strategic insight, analytical rigor, and emotional intelligence. By embracing this dynamic phase in Yen’s journey, traders and analysts can navigate the complexities of the forex terrain with confidence and astuteness. The key to unlocking the full potential of the Yen lies in dedicated vigilance, meticulous analysis, and a proactive stance that remains ever-cognizant of the subtle yet significant forces shaping its trajectory.