Japanese Yen hangs near multi-decade low against USD, bears not ready to give up yet

Japanese Yen hangs near multi-decade low against USD, bears not ready to give up yet

  • The Japanese Yen is undermined by the BoJ’s cautious outlook and a positive risk tone.
  • Intervention fears might limit losses for the JPY and cap any further gains for USD/JPY.
  • Traders also prefer to wait for a break of a short-term range ahead of the US NFP on Friday.

The Japanese Yen (JPY) ticks lower against its American counterpart during the Asian session on Thursday and remains well within the striking distance of a multi-decade low touched last week. The Bank of Japan struck a dovish tone at the end of the March meeting and stopped short of offering any guidance about future policy steps, or the pace of policy normalization. This, along with a generally positive tone around the equity markets, undermines the safe-haven JPY and assists the USD/JPY pair in attracting some dip-buying near the 151.55 area. 

Investors, meanwhile, remain on alert amid speculations that Japanese authorities will intervene in the market to prevent a destabilising fall in the domestic currency. This might hold back the JPY bears from placing aggressive bets and keep a lid on any further appreciating move for the USD/JPY pair. Investors might also prefer to wait for more cues about the Federal Reserve’s (Fed) rate-cut path before positioning for the near-term trajectory. Hence, the focus remains on the release of the US jobs data, or the Nonfarm Payrolls (NFP) report on Friday.

Daily Digest Market Movers: Japanese Yen bulls remain on the sidelines amid the BoJ’s dovish outlook

  • Japanese government officials continued with their jawboning to defend the domestic currency, which, in turn, is seen lending some support to the Japanese Yen, though the upside potential seems limited.
  • Japan’s former Vice Finance Minister for International Affairs, Tatsuo Yamasaki, said earlier this week that the country is ready to intervene in the currency market should the JPY weaken beyond its current range.
  • The Automatic Data Processing reported on Wednesday that the US private sector employment rose by 184K in March against the 148 expected and the previous month’s upwardly revised reading of 155K.
  • Separately, data published by the Institute for Supply Management showed that the US Services PMI dropped to 51.4 in March from the 52.6 previous, while the Prices Paid Index declined to 53.4 from 58.6.
  • Federal Reserve Chairman Jerome Powell did not specify the timing or scale of the potential cuts and said on Wednesday that it would take a while to evaluate the current state of inflation before the interest rate cut.
  • This comes after several Fed officials this week warned that the central bank was in no hurry to begin cutting rates, though the markets are still pricing in a greater chance of a move at the June policy meeting.
  • The yield on the benchmark 10-year US government bond retreated after hitting a four-month high on Wednesday and prompted aggressive US Dollar selling, capping the USD/JPY pair ahead of the 152.00 mark.
  • This boosted investors’ appetite for riskier assets, which, along with the Bank of Japan’s (BoJ) dovish language, signaling that the next rate hike will be some time away, should keep a lid on the safe-haven JPY.

Technical Analysis: USD/JPY extends the range play below multi-decade high, bullish potential seems intact

From a technical perspective, the USD/JPY pair has been oscillating in a range over the past two weeks or so. Against the backdrop of a strong rally from the March swing low, this might still be categorized as a bullish consolidation phase. Moreover, oscillators on the daily chart are holding in the positive territory and are still far from being in the overbought zone, suggesting that the path of least resistance for spot prices is to the upside. That said, it will still be prudent to wait for a sustained breakout through the 152.00 round-figure mark before positioning for any further gains.

On the flip side, any meaningful slide might continue to find decent support near the 151.00 mark or the lower end of the short-term trading range. A convincing break through the said handle, leading to a subsequent fall below the 150.80-150.75 horizontal resistance breakpoint, now turned support, has the potential to drag the USD/JPY pair to the next relevant support near the 150.25 region. This is closely followed by the 150.00 psychological mark, which, if broken decisively, might shift the bias in favor of bearish traders and pave the way for a further corrective decline towards the 149.35-149.30 region en route to the 149.00 mark.

 

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