- The Japanese Yen benefits from a softer risk tone and worries about a global economic downturn.
- Bulls seem unaffected by dovish-sounding remarks by BoJ Governor Kazuo Ueda on Thursday.
- A subdued US Dollar price action contributes to the USD/JPY pair’s slide from the 100-day SMA.
The Japanese Yen (JPY) reverses a major part of its weekly losses registered over the past three days against the US Dollar (USD), dragging the USD/JPY pair to the 146.70 area during the Asian session on Thursday. A weaker trading sentiment around the equity markets turns out to be a key factor benefitting the JPY’s relative safe-haven status. Apart from this, growing acceptance that the Bank of Japan (BoJ) will eventually begin tightening its ultra-loose policy and end its yield curve control measures during the first few months of 2024 underpin the JPY.
The JPY bulls, meanwhile, seem unaffected and largely shrugged off BoJ Governor Kazuo Ueda’s dovish remarks on Thursday amid subdued USD price action. The US ADP report on Wednesday pointed to a notable reduction in private-sector employment. This comes a day after the US Labor Department reported that job openings tumbled in October to the lowest level since March 2021 and was seen as another sign that the tight labor market could be loosening. The data reaffirms market bets that the Federal Reserve (Fed) will cut rates as early as March 2024.
Dovish Fed expectations, meanwhile, keep the US Treasury bond yields depressed near a multi-month low, which fails to assist the USD to build on its recent strong move up to a two-week high touched on Wednesday. This, in turn, does little to lend any support to the USD/JPY pair. Traders, however, might refrain from placing aggressive directional bets ahead of the US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) on Friday. In the meantime, Thursday’s release of the Weekly Initial Jobless Claims data might provide some impetus.
Daily Digest Market Movers: Japanese Yen continues to strenghten against the USD despite BoJ Governor Ueda’s dovish remarks
- Signs that a tight US job market is loosening raise concerns about an economic slowdown and weigh on investors’ sentiment, benefitting the safe-haven Japanese Yen.
- The US Labor Department reported Tuesday that job openings declined by 617K to 8.73 million in October, or their lowest level in two-and-a-half-years.
- The ADP report showed that US private-sector employers added just 103K jobs in November, down from the previous month’s downwardly revised 106K.
- The readings reaffirmed market expectations about an imminent shift in the Federal Reserve’s policy stance and bets for a 25 basis points rate cut at the March policy meeting.
- The slew of key US jobs data will continue on Thursday and Friday with the release of Weekly Initial Jobless Claims and the key Nonfarm Payrolls, respectively.
- Israeli forces stormed southern Gaza’s main city on Tuesday in the most intense day of combat of ground operations against Hamas militants, worsening the humanitarian crisis.
- The mixed Trade Balance data from China showed that imports unexpectedly declined by 0.6% in November, fueling concerns about weak domestic demand amid looming recession risks.
- Bank of Japan Governor Kazuo Ueda said this Thursday that accommodative monetary policy and stimulus measures are supporting the Japanese economy.
- Ueda added that they have not yet reached a situation in which they can achieve the price target sustainably and stably and with sufficient certainty.
- Moreover, BoJ board members recently said that it is premature to debate an exit from the ultra-easy policy, which, in turn, might cap any further gains for the JPY.
Technical Analysis: USD/JPY hangs near multi-month low touched earlier this week, remains vulnerable
From a technical perspective, this week’s repeated failures to move back above the 100-day SMA support breakpoint, now turned resistance, currently around the 147.45 area, and the subsequent decline favours bearish traders. Moreover, oscillators on the daily chart are holding deep in the negative territory and are still far from being in the oversold zone. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the downside and supports prospects for further losses.
Meanwhile, any subsequent decline is likely to find some support near the 146.65 region, below which spot prices could slide back to a multi-month low, around the 146.20 area touched on Monday. The latter coincides with the 38.2% Fibonacci retracement level of the July-October rally and should act as a key pivotal point. Some follow-through selling below the 146.00 mark could then drag the USD/JPY pair to the 145.45-145.40 intermediate support en route to the 145.00 psychological mark.
On the flip side, the 100-day SMA might continue to act as an immediate strong barrier, which if cleared decisively might trigger a short-covering rally and allow spot prices to reclaim the 148.00 mark. Any further move up, however, is likely to confront stiff barrier and remain capped near the 148.30-148.40 region. A sustained strength beyond the latter will suggest that the recent pullback from the 152.00 neighbourhood has run its course and shift the bias in favour of bullish traders.
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 New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.07% | 0.11% | 0.08% | 0.35% | -0.27% | 0.30% | 0.12% | |
| EUR | -0.07% | 0.02% | 0.01% | 0.28% | -0.36% | 0.23% | 0.05% | |
| GBP | -0.10% | -0.03% | -0.01% | 0.26% | -0.37% | 0.20% | 0.02% | |
| CAD | -0.08% | -0.02% | 0.01% | 0.27% | -0.35% | 0.21% | 0.03% | |
| AUD | -0.35% | -0.29% | -0.26% | -0.27% | -0.62% | -0.06% | -0.24% | |
| JPY | 0.27% | 0.36% | 0.37% | 0.34% | 0.61% | 0.61% | 0.39% | |
| NZD | -0.30% | -0.23% | -0.21% | -0.22% | 0.06% | -0.57% | -0.18% | |
| CHF | -0.12% | -0.05% | -0.02% | -0.03% | 0.23% | -0.38% | 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).
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-recovers-a-major-part-of-its-weekly-losses-against-us-dollar-202312070236