Japanese Yen remains depressed for the third straight day against US Dollar – 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 remains depressed for the third straight day against US Dollar – Crypto News

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  • The Japanese Yen meets with a fresh supply in reaction to the dismal domestic data.
  • An uptick in the US bond yields acts as a tailwind for the USD and the USD/JPY pair.
  • Expectations of a hawkish BoJ pivot should help limit any meaningful fall for the JPY.

The Japanese Yen (JPY) turns lower for the third successive day on Thursday and languishes near a two-week low against the US Dollar (USD) during the Asian session. Against the backdrop of a devastating 7.6 magnitude earthquake on New Year’s Day, weaker Japanese data, showing that factory activity contracted at the steepest pace in 10 months during December, turns out to be a key factor undermining the JPY. Furthermore, doubts over early interest rate cuts by the Federal Reserve (Fed) lend support to the US Treasury bond yields, which, in turn, is seen acting as a tailwind for the Greenback and the USD/JPY pair. 

Investors, however, seem convinced that the Fed will soften its hawkish stance and are pricing in a greater chance of a 25-basis point (bps) rate cut in March. This, in turn, should keep a lid on the US bond yields and the USD. Apart from this, growing acceptance that the Bank of Japan (BoJ) will shift away from negative interest rates and Yield Curve Control (YCC) policies in April, after the annual wage negotiations in March, along with a softer risk tone, should limit losses for the safe-haven JPY. This warrants some caution before placing aggressive bullish bets around the USD/JPY pair and positioning for further gains.

Market participants now look forward to the US economic docket, featuring the release of the ADP report on private-sector employment and the usual Initial Jobless Claims data later during the early North American session. The focus, however, will remain glued to the closely-watched US monthly jobs data – popularly known as the Nonfarm Payrolls (NFP) report on Friday.

Daily Digest Market Movers: Japanese Yen hangs near two-week low against USD

  • The Japanese Yen surrenders its modest Asian session gains in the wake of weaker domestic data, though a combination of supporting factors should help limit deeper losses.
  • The au Jibun Bank Japan Manufacturing PMI remained in contraction territory for the seventh straight month and shrank to 47.9 in December – its weakest reading since February.
  • The anticipation of a reversal in policy divergence between the Bank of Japan (BoJ) and the Federal Reserve (Fed) in 2024 should continue to lend some support to the JPY.
  • Minutes of the December 12-13 FOMC meeting reflected a consensus that inflation is under control and concern about the risks that overly restrictive policy may pose to the economy.
  • The minutes, however, did not provide direct clues about when rate cuts might commence, which, in turn, is seen acting as a tailwind for the US bond yields and the US Dollar.
  • The Institute for Supply Management (ISM) said on Wednesday that the pace of decline in the US manufacturing sector slowed amid a modest rebound in production and improvement in factory employment.
  • The US ISM Manufacturing PMI improved to 47.4 last month after being unchanged at 46.7 for two straight months, though remained in contraction territory for the 14th consecutive month.
  • Separately, the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) showed that employment listings fell to 8.79 million in November – the lowest since March 2021.
  • Investors now look to the US ADP report, which is expected to show that private-sector employers added 115K jobs in December as compared to the 103K in the previous month.
  • The market focus, however, will remain glued to the official monthly employment details – popularly known as the Nonfarm Payrolls (NFP) report on Friday.

Technical Analysis: USD/JPY bulls have the upper hand above 200-day SMA

From a technical perspective, the overnight move beyond the 143.00-143.10 confluence, comprising the 200-day Simple Moving Average (SMA) and the 23.6% Fibonacci retracement level of the November-December downfall, favours bullish traders. That said, oscillators on the daily chart – though have been recovering from lower levels – are yet to confirm a positive bias. Hence, it will be prudent to wait for some follow-through buying before confirming that the USD/JPY pair has formed a near-term bottom and positioning for any further appreciating move.

In the meantime, the overnight swing high, around the 143.70-143.75 region, is likely to act as an immediate hurdle ahead of the 144.00 round figure. A sustained strength beyond the latter will reaffirm the positive outlook and lift the USD/JPY pair towards the 38.2% Fibo. level, around the 144.65 zone. The upward trajectory could get extended further and allow bulls to aim back towards reclaiming the 145.00 psychological mark.

On the flip side, the Asian session low, around the 142.85 region, coinciding with the very important 200-day SMA, might continue to protect the immediate downside. A convincing break below could make the USD/JPY pair vulnerable to accelerate the slide back towards the 142.00 mark. The next relevant support is pegged near the 141.75 horizontal zone, below which spot prices could weaken to the 141.00 round figure en route to the 140.75 intermediate support before eventually dropping to a multi-month low, around the 140.25 region.

Japanese Yen price this week

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the weakest against the US Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   1.24% 0.52% 0.73% 1.20% 1.64% 1.20% 1.12%
EUR -1.08%   -0.53% -0.35% 0.16% 0.47% 0.13% -0.01%
GBP -0.54% 0.55%   0.21% 0.68% 1.20% 0.68% 0.52%
CAD -0.73% 0.34% -0.04%   0.48% 0.95% 0.46% 0.33%
AUD -1.22% -0.13% -0.68% -0.49%   0.23% 0.01% -0.13%
JPY -1.66% -0.39% -1.06% -0.72% -0.23%   -0.28% -0.60%
NZD -1.21% -0.12% -0.68% -0.48% 0.01% 0.27%   -0.14%
CHF -1.05% 0.04% -0.51% -0.29% 0.18% 0.58% 0.17%  

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).

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

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