- The Japanese Yen seesaws between tepid gains/losses against the USD on Wednesday.
- Traders seem reluctant on the back of mixed signals about the BoJ’s near-term policy outlook.
- The focus remains on the outcome of the highly-anticipated FOMC monetary policy meeting.
The Japanese Yen (JPY) trimmed a part of its strong intraday gains against its American counterpart on Tuesday after data released from the United States (US) showed that consumer prices rose unexpectedly in November. This comes on top of reports that the Bank of Japan (BoJ) policymakers see little need to end negative rates in December. Adding to this, an extension of the bullish run in the equity markets undermined the safe-haven JPY and assisted the USD/JPY pair to rebound around 75 pips from the daily swing low.
Market participants, however, seem convinced that the Japanese central bank will eventually end its ultra-loose monetary policy settings early next year, which holds back traders from placing aggressive bearish bets around the JPY. Furthermore, investors opt to remain on the sidelines and look to the outcome of the highly-anticipated two-day FOMC monetary policy meeting later this Wednesday for some meaningful impetus. This, in turn, leads to the USD/JPY pair’s subdued range-bound price action during the Asian session.
The Federal Reserve (Fed) is scheduled to announce its policy decision during the US session and is widely expected to leave interest rates unchanged. Hence, the focus will remain on the accompanying monetary policy statement and updated economic projections. This, along with Fed Chair Jerome Powell’s remarks at the post-meeting press conference, will be looked for cues about the timing of when the central bank will begin easing policy. This will influence the USD and determine the near-term trajectory for the USD/JPY pair.
Daily Digest Market Movers: Japanese Yen bulls remain cautious amid confusion over BoJ pivot
- The US Labor Department reported on Tuesday that the headline Consumer Price Index (CPI) edged up 0.1% in November and the yearly rate ticked down to 3.1% from the 3.2% previous.
- The annual Core CPI inflation, which excludes volatile food and energy prices, held steady at 4.0% as forecast and rose 0.1% on a monthly basis, little changed as compared to the previous month.
- The November numbers were still well above the Federal Reserve’s 2% target, which, along with Friday’s stronger US jobs data, forced investors to further scale back bets for a March rate cut.
- This allowed the US Dollar to pare the overnight losses and helped the USD/JPY pair to attract some dip-buying near the 144.70 area, though the momentum lacked any follow-through.
- Traders have been trimming their bets for a stronger Japanese Yen amid confusion over an imminent shift in the Bank of Japan’s policy stance and the prevalent risk-on environment.
- The Tankan survey showed that Business confidence at big Japanese manufacturers improved more than expected in the fourth quarter, albeit doing little to impress the JPY bulls.
- The focus remains glued to the key FOMC decision, which will be accompanied by updated economic projections and followed by Federal Reserve Chair Jerome Powell’s presser.
- Investors will look for fresh cues about the timing of when the US central bank may begin cutting rates in 2024 amid signs of easing inflation and the still resilience US economy.
Technical Analysis: USD/JPY might continue to face stiff resistance near the 200-hour SMA
From a technical perspective, the USD/JPY pair found decent support on Tuesday near the 38.2% Fibonacci retracement level of the recent solid rebound from a multi-month low touched last week. The lack of any strong follow-through buying, along with the fact that oscillators on the daily chart are holding deep in the negative territory, warrants some caution for bullish traders. Hence, any subsequent move up is likely to confront resistance near the 146.00 round-figure mark. This is closely followed by the 200-hour Simple Moving Average (SMA), currently around the 146.25 region, which if cleared decisively could set the stage for additional gains.
On the flip side, weakness below the 145.00 psychological mark might continue to attract some buyers near the 144.70 area, or the 38.2% Fibo. level. A convincing break below will be seen as a fresh trigger for bearish traders and drag the USD/JPY pair further towards the 50% Fibo. support near the 144.00 round figure, en route to the 143.55-143.50 region (61.8% Fibo.). Spot prices could eventually weaken below the 143.00 mark and aim to test the next relevant support near mid-142.00s.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.04% | 0.09% | 0.02% | 0.03% | 0.12% | 0.22% | 0.04% | |
| EUR | -0.04% | 0.05% | -0.01% | -0.01% | 0.08% | 0.17% | 0.00% | |
| GBP | -0.10% | -0.06% | -0.06% | -0.06% | 0.03% | 0.10% | -0.06% | |
| CAD | -0.04% | 0.01% | 0.07% | -0.01% | 0.09% | 0.19% | -0.01% | |
| AUD | -0.02% | 0.01% | 0.06% | 0.00% | 0.08% | 0.19% | 0.01% | |
| JPY | -0.13% | -0.09% | -0.04% | -0.10% | -0.13% | 0.08% | -0.09% | |
| NZD | -0.22% | -0.17% | -0.12% | -0.19% | -0.18% | -0.09% | -0.18% | |
| CHF | -0.04% | 0.00% | 0.05% | -0.01% | -0.01% | 0.08% | 0.18% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Source: https://www.fxstreet.com/news/japanese-yen-lacks-firm-intraday-direction-as-traders-remain-on-the-sidelines-ahead-of-fed-202312130147