- The Japanese Yen remains close to over a two-week high touched against the USD on Thursday.
- The BoJ’s hawkish tilt, along with geopolitical tensions, continue to underpin the safe-haven JPY.
- Expectations for an imminent shift in the Fed’s policy stance keep the USD bulls on the defensive.
- Investors opt to move to the sidelines and look to the US jobs report (NFP) for a fresh impetus.
The Japanese Yen (JPY) remains on the front foot against its American counterpart during the Asian session on Friday and remains well within the striking distance of over a two-week high touched the previous day. The Bank of Japan’s (BoJ) hawkish tilt last week, along with the recent narrowing of the US-Japan rate differential, geopolitical tensions and geopolitical tensions stemming from the Middle East conflict, continue to underpin the safe-haven JPY. Bulls, however, take a breather and opt to wait on the sidelines ahead of the release of the US monthly jobs data, or the Nonfarm Payrolls (NFP) report.
Meanwhile, the US Dollar (USD) languishes near the lower end of a familiar range held over the past two weeks or so amid bets for a steep series of rate cuts by the Federal Reserve (Fed) this year. This, in turn, is seen as another factor acting as a headwind for the USD/JPY pair. That said, a generally positive tone around the equity markets, along with a modest rebound in the US Treasury bond yields, keeps a lid on any further appreciating move for the JPY and assists the currency pair to hold above the 146.00 mark. Nevertheless, spot prices remain on track to end in the red for the second straight week.
Daily Digest Market Movers: Japanese Yen bulls turn cautious ahead of US NFP, downside seems cushioned
- The Japanese Yen draws support from the fact that the Bank of Japan last week signalled conviction on hitting inflation goal, setting the stage to pull interest rates out of negative territory at its upcoming meetings in March or April.
- Tensions in the Middle East persist after the US vowed to take “all necessary actions” to defend its troops following a deadly drone attack in Jordan and as Yemen-based Houthi forces continue to attack shipping in the Red Sea.
- Reuters, citing a Palestinian official, reported that Hamas received its first proposal for an extended pause to the fighting in Gaza in exchange for releasing the remaining hostages it holds, though has not yet responded to it.
- An official factory survey showed on Wednesday that manufacturing activity in China contracted for a fourth straight month in January, suggesting that the world’s second-largest economy is struggling to regain momentum.
- The US Dollar witnessed a dramatic turnaround from the YTD peak touched on Thursday amid growing acceptance that the Federal Reserve is nearing a long-awaited shift toward cutting interest rates this year.
- Fed Chair Jerome Powell said on Wednesday that interest rates had peaked and would move lower in coming months, though strongly pushed back against market expectations for such a move in March.
- The yield on the benchmark 10-year US government bond bounces off over a one-month trough touched on Thursday, albeit remains below the 4% mark and keeps the US Dollar bulls on the defensive.
- Investors now look forward to the release of the US monthly employment report (NFP), which is expected to show that the economy added 180K jobs in January as compared to the 216K in the previous month.
- Meanwhile, the Unemployment Rate is anticipated to edge higher to 3.8% from 3.7% in December, while Average Hourly Earnings growth is seen holding steady at the 4.1% YoY rate during the reported month.
Technical Analysis: USD/JPY needs to find acceptance below 146.00 for bears to seize near-term control
From a technical perspective, the overnight breakdown through the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 23.6% Fibonacci retracement level of the December-January favour bearish traders. Moreover, oscillators on the said chart are holding deep in the negative territory and have been losing positive traction on the daily chart. That said, it will still be prudent to wait for acceptance below the 146.00 mark before positioning for deeper losses. The USD/JPY pair might then accelerate the fall towards the 38.2% Fibo. level, around the 145.55 region, before eventually dropping to the 145.00 psychological mark, representing the 200-period SMA on the 4-hour chart.
On the flip side, the 146.75 area now seems to act as an immediate hurdle ahead of the 147.00 mark and the 147.15 area, or the 100-period SMA on the 4-hour chart. A sustained strength beyond the said barriers might shift the bias back in favour of bulls and set the stage for the resumption of the uptrend witnessed since the beginning of this year. The subsequent move up has the potential to lift the USD/JPY pair further towards the 148.00 mark en route to the 148.75-148.80 double-top resistance, or the YTD peak touched in January.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.03% | 0.02% | -0.06% | -0.17% | -0.05% | -0.02% | -0.02% | |
| EUR | -0.03% | -0.02% | -0.08% | -0.21% | -0.08% | -0.07% | -0.05% | |
| GBP | 0.00% | 0.03% | -0.06% | -0.18% | -0.05% | -0.03% | -0.03% | |
| CAD | 0.05% | 0.08% | 0.06% | -0.14% | -0.01% | 0.02% | 0.03% | |
| AUD | 0.18% | 0.22% | 0.20% | 0.14% | 0.13% | 0.15% | 0.17% | |
| JPY | 0.05% | 0.06% | 0.06% | -0.02% | -0.13% | 0.02% | 0.03% | |
| NZD | 0.04% | 0.07% | 0.06% | -0.01% | -0.13% | -0.01% | 0.01% | |
| CHF | 0.02% | 0.06% | 0.04% | -0.02% | -0.14% | 0.01% | 0.00% |
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).
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
The Bank’s massive stimulus 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 policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
Source: https://www.fxstreet.com/news/japanese-yen-consolidates-its-weekly-gains-against-usd-as-traders-await-us-nfp-202402020158