Japanese Yen stands tall near one-month top against USD on hawkish BoJ talks

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■  The Japanese Yen continues to draw support from expectations for a hawkish BoJ pivot.

■  Bets for a June Fed rate cut undermine the USD and further exert pressure on USD/JPY.

■  An upward revision of Japan’s Q4 GDP print contributes to the offered tone on Monday.


The Japanese Yen (JPY) rallied to the highest level since early February against its American counterpart on Friday amid bets for an imminent shift in the Bank of Japan's (BoJ) policy stance. Moreover, investors seem convinced that another substantial pay hike in Japan will fuel demand-driven inflationary pressure and allow the BoJ to end the negative interest rates as early as the March 18-19 meeting. This, along with an upward revision of Japan's fourth-quarter GDP print, underpins the JPY and keeps the USD/JPY pair depressed through the Asian session on Monday.


Meanwhile, the US employment report for February reaffirmed expectations that the Federal Reserve (Fed) will start cutting interest rates in June and continues to weigh on the US Dollar (USD). This turns out to be another factor that contributes to the offered tone surrounding the USD/JPY pair for the sixth straight day and supports prospects for a further depreciating move. The market focus now shifts to the US consumer inflation figures, due for release on Tuesday. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside.


Daily Digest Market Movers: Japanese Yen remains well supported by bets for an imminent shift in the BoJ’s policy stance


The Japanese Yen remains on the front foot against its American counterpart for the sixth successive day on Monday amid bets that the Bank of Japan (BoJ) will end its negative rate policy in March.


Jiji News Agency reported over the weekend that the BoJ is considering scrapping its yield curve control program and indicating in advance the amount of government bonds it plans to purchase.


Furthermore, data released last week showed that wage growth in Japan marked the highest rise since last June and reaffirmed market bets for an imminent shift in the BoJ's monetary policy stance.


A revised GDP report showed on Monday that Japan's economy expanded by 0.1% during the fourth quarter as against a 0.1% contraction reported previously and avoided a technical recession.


This gives the BoJ more headroom to pivot away from its ultra-loose monetary policy settings, which continue to underpin the JPY and keep the USD/JPY pair depressed near a one-month low.


A spike in the US unemployment rate to its highest level in two years lifted bets for a June rate cut by the Federal Reserve and dragged the US Dollar to its lowest level since mid-January on Friday.


The headline NFP showed that the US economy added 275K jobs in February vs. 200K estimated, through was offset by a downward revision of the previous month's reading to 229K from 353 K.


Investors now look forward to the release of the latest US consumer inflation figures on Tuesday for a fresh impetus, though the near-term bias seems tilted firmly in favour of the JPY bulls.


Technical Analysis: USD/JPY continues to show hows some resilience below 38.2% Fibo. level, remains vulnerable to sliding further


From a technical perspective, Friday's breakdown below the 100-day Simple Moving Average (SMA) was seen as a fresh trigger for bearish traders. This comes on top of the recent repeated failures ahead of the 152.00 mark, which constituted the formation of a double-top pattern on the daily chart. Moreover, oscillators on the said chart are holding deep in the negative territory and validate the bearish outlook for the USD/JPY pair. That said, it will still be prudent to wait for acceptance below the 38.2% Fibonacci retracement level of the December-February rally before positioning for further losses. Some follow-through selling below the 200-day SMA, currently pegged near the 146.30-146.25 region, will reaffirm the negative bias and drag spot prices below the 146.00 round figure, towards the 50% Fibo. level, around the 145.60 zone.


On the flip side, any meaningful recovery attempt beyond the 147.00 round figure is more likely to attract fresh sellers and remain capped near the 100-day SMA support breakpoint, now turned resistance near mid-147.00s. A sustained strength beyond, however, could trigger a short-covering rally and lift the USD/JPY pair beyond the 148.00 mark, towards testing the next relevant hurdle near the 148.65-148.70 region. The momentum could extend further towards reclaiming the 149.00 round figure en route to the 149.25 horizontal support-turned-resistance.

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