- The Japanese Yen lacks any firm intraday direction and is influenced by a combination of diverging forces.
- Geopolitical risks, China’s economic woes and the ongoing decline in the US bond yields benefit the JPY.
- The USD remains supported by reduced bets for a March Fed rate cut and helps limit losses for USD/JPY.
The Japanese Yen (JPY) seesaws between tepid gains/minor losses against its American counterpart heading into the European session on Thursday, though remains well within the the striking distance of a two-week high touched the previous day. A positive tone around the US equity futures is seen as a key factor acting as a headwind for the safe-haven JPY amid a bullish US Dollar (USD), supported by the Federal Reserve’s (Fed) less dovish outlook on Wednesday. That said, a combination of factors underpin the JPY and fails to assist the USD/JPY pair to build on the overnight bounce from the 146.00 mark.
Investors remain worried that the recent escalation of conflicts in the Middle East could trigger a wider war, which, along with China’s economic woes, continue to benefit the JPY’s relative safe-haven status. Moreover, the Bank of Japan’s (BoJ) hawkish tilt last week lends additional support to the domestic currency. Add to this, the recent decline in the US Treasury bond yields has resulted in the narrowing of the US-Japan rate differential, which further seems to inspire the JPY bulls and cap the upside for the USD/JPY pair. Traders now look to the US ISM Manufacturing PMI for short-term opportunities.
Daily Digest Market Movers: Japanese Yen struggles to gain any meaningful traction amid mixed fundamental cues
- The Japanese Yen draws support from the deepening Middle East tensions and the Bank of Japan’s hawkish tilt, saying that conditions for phasing out huge stimulus and pulling short-term rates out of negative territory were falling into place.
- The European Union hopes to launch a naval mission in the Red Sea within three weeks to help defend cargo ships against attacks by Houthi rebels, which are hampering trade and driving up prices, the bloc’s top diplomat said Wednesday.
- The BoJ’s Summary of Opinions report from the January 2024 meeting published on Wednesday suggested that the central bank must maintain monetary easing under YCC, though members discussed prospects for exiting negative rates.
- The Federal Reserve left its benchmark interest rate unchanged in a range of 5.25% to 5.50% and dropped the longstanding reference to possible further hikes in the borrowing cost, though gave no hint that a rate cut was imminent.
- In the post-meeting press conference, Fed Chair Jerome Powell acknowledged the US economic strength and declined to declare victory in the two-year fight against inflation, dealing a severe blow to expectations for a March rate cut.
- Traders are now pricing in a 38% probability that the Fed will cut interest rates in March, down from 59% before the FOMC announcement and nearly 90% a month ago, lending support to the US Dollar and the USD/JPY pair.
- Data published by Automatic Data Processing (ADP) showed that private-sector employers added 107,000 jobs in January as compared to 145,000 anticipated and the previous month’s downwardly revised reading of 158,000.
- The yield on the benchmark 10-year US government bond slides further below the 4.0% mark, which keeps the Greenback below the YTD peak touched earlier this week and does little to provide any meaningful impetus.
- Traders now look to the US economic docket, featuring the usual Weekly Initial Jobless Claims and the ISM Manufacturing PMI, for some impetus ahead of the US monthly jobs report, or the Nonfarm Payrolls on Friday.
Technical Analysis: USD/JPY bears need to wait for a sustained break below 146.00 before placing fersh bets
From a technical perspective, the USD/JPY pair has been showing some resilience below the 23.6% Fibonacci retracement level of the December-January rally. Moreover, oscillators on the daily chart – though have been losing traction – are still holding in the positive territory. This, in turn, warrants some caution for bearish traders. Hence, any intraday weakness might continue to find some support near the 146.00 mark or the overnight swing low. This is followed by the 38.2% Fibo. level, around the 145.60-145.55 region, which if broken decisively should pave the way for deeper losses.
On the flip side, momentum beyond the 147.00 mark is likely to confront some resistance near the 100-day Simple Moving Average (SMA), currently around the 147.55 zone. A sustained strength beyond has the potential to lift the USD/JPY pair back towards the 148.00 mark en route to the 148.35-148.40 supply zone. Bulls, however, might wait for some follow-through buying beyond the 148.80 area, or a nearly two-month high touched in January before positioning for the resumption of the recent uptrend witnessed over the past month or so.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.04% | -0.01% | -0.01% | -0.02% | -0.16% | -0.17% | 0.10% | |
| EUR | 0.05% | 0.04% | 0.00% | 0.06% | -0.07% | -0.09% | 0.14% | |
| GBP | 0.02% | -0.03% | -0.03% | 0.03% | -0.10% | -0.13% | 0.10% | |
| CAD | 0.01% | -0.01% | 0.03% | 0.05% | -0.09% | -0.10% | 0.15% | |
| AUD | 0.02% | -0.06% | -0.03% | -0.05% | -0.14% | -0.16% | 0.11% | |
| JPY | 0.14% | 0.08% | 0.10% | 0.06% | 0.11% | -0.07% | 0.21% | |
| NZD | 0.12% | 0.11% | 0.13% | 0.13% | 0.12% | -0.02% | 0.23% | |
| CHF | -0.09% | -0.14% | -0.10% | -0.10% | -0.08% | -0.23% | -0.24% |
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).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Source: https://www.fxstreet.com/news/japanese-yen-remains-on-the-front-foot-against-usd-holds-just-below-two-week-high-202402010154