Japanese Yen recovers a part of Tuesday’s losses ahead of US macro data and FOMC minutes – Crypto News – Crypto News
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USD/JPY extends recovery above 136.60, investors turn risk-averse ahead of Jackson Hole USD/JPY extends recovery above 136.60, investors turn risk-averse ahead of Jackson Hole

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Japanese Yen recovers a part of Tuesday’s losses ahead of US macro data and FOMC minutes – Crypto News

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  • The Japanese Yen continues to draw support from expectations for a shift in the BoJ’s policy stance.
  • A softer risk tone further benefits the safe-haven JPY and caps USD/JPY amid subdued USD demand.
  • Investors now look to the US economic data for some impetus ahead of the FOMC meeting minutes.

The Japanese Yen (JPY) attracts some buyers during the Asian session on Wednesday and reverses a part of the previous day’s heavy losses against the US Dollar (USD). As investors assess the impact of a powerful New Year’s Day earthquake in Japan, the anticipation of a reversal in policy divergence between the Bank of Japan (BoJ) and the Federal Reserve (Fed) in 2024 lends some support to the JPY. In fact, the BoJ is anticipated to abandon its ultra-loose monetary policy settings, while the US central bank is expected to deliver a series of interest rate cuts throughout the year.

Apart from this, a softer risk tone, geopolitical risks and China’s economic woes benefit the JPY’s relative safe-haven status. The USD, on the other hand, enters a bullish consolidation phase after recording its biggest daily percentage gains since October on Tuesday and caps the USD/JPY pair’s overnight rally of over 140 pips. Traders also seem reluctant ahead of the FOMC meeting minutes, which might offer cues about the Fed’s future policy moves.

Wednesday’s US economic docket also highlights the ISM Manufacturing PMI and JOLTS Job Openings data. This might provide some impetus to the USD/JPY pair during the North American session. The market focus will then shift to the US ADP report on private-sector employment, followed by the official Nonfarm Payrolls (NFP) on Thursday and Friday, respectively. The key labor market reports will influence the Fed’s outlook and influence the USD.

Daily Digest Market Movers: Japanese Yen draws support from bets for a hawkish BoJ shift

  • The initial market reaction to a 7.6 magnitude earthquake in Japan on Monday fades rather quickly amid expectations of a hawkish shift in the Bank of Japan’s policy stance.
  • The BoJ is anticipated to exit its ultra-loose policy in April, after the annual wage negotiations in March, though the possibility of such a move in January cannot be ruled out.
  • Meanwhile, the Federal Reserve is widely expected to start cutting interest rates as early as March and deliver 150 basis points (bps) of cumulative rate cuts by the year-end.
  • The overnight sharp move up in the US Treasury bond yields, however, reflected doubts that the Fed will deliver the extent of monetary easing that is priced in the markets.
  • The yield on the benchmark 10-year US government bond rose above 4.0% for the first time in two weeks on Tuesday and provided a strong boost to the US Dollar.
  • Rising US bond yields weighed on growth stocks and triggered a corrective decline in the US equity markets, benefitting the safe-haven JPY and capping the USD/JPY pair.
  • Traders now look to the US ISM Manufacturing PMI and JOLTS Job Openings data ahead of the FOMC minutes, which will be scrutinized to ascertain the timing of potential rate cuts.
  • The market attention will then shift to the ADP’s US private-sector employment report on Thursday, though the focus remains on the crucial Nonfarm Payrolls (NFP) on Friday.

Technical Analysis: USD/JPY fails to capitalize on the previous day’s strong move up

From a technical perspective, a move beyond the 142.00 round figure might have set the stage for further gains, albeit bearish oscillators on the daily chart warrant caution for bullish traders. Hence, any subsequent move up is more likely to attract fresh sellers near the 142.40 region and remain capped near the very important 200-day Simple Moving Average (SMA) support breakpoint, currently around the 143.00 mark.

On the flip side, the 141.55 zone now seems to protect the immediate downside, below which the USD/JPY pair could slide back to the 141.00 round figure. Some follow-through selling will expose the multi-month low, around the 140.25 area touched last week, and the 140.00 psychological mark. The latter should act as a key pivotal point, which if broken decisively will be seen as a fresh trigger for bearish traders. Spot prices might then accelerate the fall towards the 139.35 region en route to the 139.00 mark, the 138.75 area and the 138.00 mark (July 28 low).

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 Australian Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.11% -0.05% 0.02% 0.07% -0.16% -0.08% -0.07%
EUR 0.11%   0.05% 0.13% 0.17% -0.05% 0.02% 0.04%
GBP 0.05% -0.05%   0.08% 0.12% -0.11% -0.03% -0.02%
CAD -0.02% -0.13% -0.08%   0.03% -0.17% -0.10% -0.09%
AUD -0.07% -0.16% -0.12% -0.04%   -0.22% -0.15% -0.14%
JPY 0.16% 0.05% 0.09% 0.18% 0.22%   0.05% 0.09%
NZD 0.08% -0.02% 0.03% 0.11% 0.15% -0.08%   0.02%
CHF 0.08% -0.03% 0.01% 0.09% 0.14% -0.09% -0.02%  

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.

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