Japanese Yen retreats further from one-week top touched against USD on Wednesday – Crypto News – Crypto News
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USD/JPY hits three-week highs above 137.00, extends weekly gains to more than 350 pips USD/JPY hits three-week highs above 137.00, extends weekly gains to more than 350 pips

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Japanese Yen retreats further from one-week top touched against USD on Wednesday – Crypto News

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  • The Japanese Yen edges lower against the USD on Thursday, though the downside seems limited. 
  • The risk-on mood and the recent widening of the US-Japan rate differential undermine the JPY.
  • The BoJ’s hawkish tilt could act as a tailwind for the JPY amid a subdued US Dollar price action.
  • Traders look to the US Q4 GDP ahead of key inflation figures from Japan and the US on Friday.

The Japanese Yen (JPY) remains depressed against its American counterpart heading into the European session on Thursday and moves further away from over a one-week high touched the previous day. Investors continue to cheer the latest optimism led by more monetary stimulus measures announced by the People’s Bank of China (PBoC) on Wednesday, which is evident from the upbeat mood across the global equity markets. This, along with the recent widening of the US-Japan rate differential, undermines the safe-haven JPY and acts as a tailwind for the USD/JPY pair. 

Meanwhile, the Bank of Japan (BoJ) said on Wednesday that conditions for phasing out stimulus and negative interest rates were falling into place. Apart from this, persistent geopolitical tensions and the uncertain global economic outlook should help limit deeper losses for the JPY. Furthermore, the US Dollar (USD) continues with its struggle to attract any meaningful buying as investors seek more clarity about the timing of when the Federal Reserve (Fed) will start cutting interest rates. This, in turn, might keep a lid on any meaningful appreciating move for the USD/JPY pair. 

Traders might also refrain from placing aggressive directional bets ahead of the crucial inflation figures from Japan and the US on Friday. Japan’s Statistics Bureau is scheduled to publish the Tokyo Core CPI report during the Asian session. The market focus, however, remains glued to the US Personal Consumption Expenditures (PCE) Price Index. In the meantime, Thursday’s US economic docket – featuring the Advance Q4 GDP report, Durable Goods Orders and the usual Weekly Initial Jobless Claims data – might produce short-term trading opportunities around the USD/JPY pair.

Daily Digest Market Movers: Japanese Yen is undermined by the prevalent risk-on mood

  • The Japanese Yen moves away from over a one-week high touched on Wednesday and is undermined by a combination of factors, though the Bank of Japan’s hawkish tilt should act as a tailwind.
  • The upbeat market sentiment gets an additional lift after the People’s Bank of China announced a reduction in the Reserve Requirement Ratio by 50 bps starting from February 5 to boost the economy.
  • The yield on the benchmark 10-year US government bond shot back closer to the monthly top in reaction to the upbeat US data, which lends support to the US Dollar and the USD/JPY pair.
  • The S&P Global flash US Manufacturing PMI rebounded from 47.9 to a 15-month high of 50.3 in January, while the gauge for the services sector climbed to 52.9, or the highest reading since last June.
  • Furthermore, the flash US Composite PMI Output Index increased to 52.3 this month, or the highest since last June, suggesting that the world’s largest economy kicked off 2024 on a stronger note.
  • This comes on top of the upbeat consumer spending and labor market data released last week, forcing investors to further scale back their expectations for an early interest rate cut by the Federal Reserve.
  • BoJ Governor Kazuo Ueda laid the groundwork for monetary policy normalisation on Tuesday and said that the likelihood of sustainably achieving the 2% inflation target was gradually increasing.
  • The head of Japan’s biggest business lobby Keidanren called for wage hikes this year that exceed the inflation rate, paving the way for the BoJ to pivot away from its ultra-easy monetary policy settings.
  • A mild verbal intervention by Japan’s top currency diplomat Masato Kanda does little to impress the JPY bulls or provide any impetus, though might contribute to keeping a lid on the USD/JPY pair. 
  • Kanda said that the government is carefully watching impact of central bank decision on financial markets and it is important for currency exchange rates to move stably reflecting economic fundamentals.
  • Traders now look to the Advance US Q4 GDP report, which is expected to show that growth in the world’s largest economy decelerated to a 2% annualized pace from 4.9% in the previous quarter.
  • Thursday’s US economic docket also features the release of Durable Goods Orders and the usual Weekly Initial Jobless Claims, which might provide some impetus to the buck and the USD/JPY pair.
  • The market attention will then shift to the release of the Tokyo core CPI and the US Personal Consumption Expenditures Price Index data – the Fed’s preferred inflation gauge – on Friday.

Technical Analysis: USD/JPY might struggle to capitalize on its gains beyond the 147.00 mark

From a technical perspective, this week’s repeated failures to find acceptance below the 100-day Simple Moving Average (SMA) and the subsequent rebounds suggest that the path of least resistance for the USD/JPY pair is to the upside. That said, any further move up is likely to confront some resistance near the 148.00 round figure ahead of the 148.20-148.25 region. The next relevant hurdle is pegged near the 148.80 region, or a multi-week high touched last Friday, which if cleared will be seen as a fresh trigger for bullish traders. Given that oscillators on the daily chart are holding comfortably in the positive territory, spot prices might then aim to surpass an intermediate hurdle near the 149.30-149.35 zone and reclaim the 150.00 psychological mark.

On the flip side, weakness below the 100-day SMA, currently around the 147.55 region, might continue to attract some buyers near the 147.00 mark. This should help limit the downside for the USD/JPY pair near the 146.45 zone, or the weekly trough touched the previous day. Some follow-through selling, however, will negate the positive bias and shift the near-term bias in favour of bearish traders, paving the way for a slide towards testing the 146.10-146.00 horizontal support. The downward trajectory could extend further towards the 145.30-145.25 intermediate support en route to the 145.00 psychological mark.

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   0.05% 0.08% 0.03% 0.08% 0.05% 0.04% 0.16%
EUR -0.05%   0.04% -0.03% 0.01% 0.00% -0.03% 0.11%
GBP -0.08% -0.04%   -0.05% -0.04% -0.03% -0.05% 0.08%
CAD -0.03% 0.02% 0.05%   0.03% 0.02% 0.00% 0.12%
AUD -0.04% -0.01% 0.02% -0.03%   0.01% -0.02% 0.10%
JPY -0.05% 0.00% 0.06% -0.01% 0.02%   -0.04% 0.11%
NZD 0.00% 0.03% 0.05% -0.02% 0.05% 0.02%   0.13%
CHF -0.16% -0.11% -0.08% -0.13% -0.08% -0.10% -0.12%  

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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