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    Japanese Yen remains confined in one-week-old range, traders await FOMC meeting minutes

    Fonte Fxstreet
    21/02/2024 02:11
    • The Japanese Yen continues with its struggle to gain any meaningful traction on Wednesday.
    • Intervention fears act as a tailwind for the JPY, though the BoJ monetary policy uncertainty caps the upside.
    • Traders look to the FOMC minutes for cues about the Fed’s rate-cut path and a fresh impetus.

    The Japanese Yen (JPY) extends the sideways consolidative price move during the Asian session on Wednesday and remains confined in a one-week-old range against its American counterpart. The recent slump below the 150.00 psychological mark prompted some verbal intervention from the Japanese authorities, which, along with the cautious market mood, underpins the safe-haven JPY. Meanwhile, expectations that the Federal Reserve (Fed) will start cutting interest rates in the coming months keep the US Dollar (USD) bulls on the defensive near a two-week low touched on Tuesday and further contribute to capping the USD/JPY pair.

    That said, a recession in Japan fuelled uncertainty about the likely timing of when the Bank of Japan (BoJ) will exit the negative interest rates policy. Apart from this, the latest optimism that additional stimulus from China could boost global growth holds back traders from placing bullish bets around the JPY and helps limit the downside for the USD/JPY pair. Moreover, investors opt to wait on the sidelines ahead of the FOMC meeting minutes, due for release later during the North American session, which will be looked for cues about the Fed's rate-cut path. This, in turn, will influence the USD and provide a fresh impetus to the currency pair.

    Daily Digest Market Movers: Japanese Yen extends the range play amid mixed fundamental cues

    • Fears that Japanese authorities will intervene in the markets to stem any further weakness in the domestic currency and a softer risk tone lend some support to the safe-haven Japanese Yen.
    • Japan's Finance Minister Shunichi Suzuki reiterated on Tuesday that the government is watching FX moves with a high sense of urgency and that the exchange rate was set by a number of factors.
    • Adding to this, Japan's Finance Ministry official Atsushi Mimura said that the government can sell assets such as savings and foreign bonds in FX reserves when it is necessary to intervene.
    • Mimura added that Japan is always communicating and coordinating with other countries in case of FX intervention and is mindful of maintaining safety and securing liquidity in FX reserves management.
    • Data released this Wednesday showed that Japanese exports grew more than expected in January, though a bigger-than-estimated fall in imports pointed to sluggish domestic demand and a weak economy.
    • Exports grew 11.9% year-on-year in January, or the highest since November 2022, as compared to a 9.5% fall anticipated, while imports shrank 9.6%, resulting in a lower-than-forecast deficit of ¥1.758 trillion.
    • According to the Reuters Tankan poll, Japanese manufacturers’ business confidence fell in February, from the previous month’s reading of 6 to -1, marking the first negative reading since last April.
    • This comes on top of a technical recession in Japan, which could derail the Bank of Japan's plan to exit its ultra-easy policy this year and is holding back the JPY bulls from placing aggressive bets.
    • The US Dollar struggles near its lowest level in over two weeks amid bets that the Federal Reserve will start cutting interest rates in the coming months and caps the upside for the USD/JPY pair.
    • Traders now look to the release of the FOMC meeting minutes for cues about the Fed's rate-cut path, which will drive the USD demand and provide some meaningful impetus to the currency pair.

    Technical Analysis: USD/JPY bulls need to wait for a move beyond the multi-month top set last week

    From a technical perspective, the recent range-bound price action warrants some caution before positioning for a firm near-term direction. That said, the recent breakout through the 148.70-148.80 horizontal barrier favours bullish traders. Moreover, oscillators on the daily chart are holding in the positive territory and are still away from the overbought zone, validating the constructive outlook for the USD/JPY pair. It, however, will still be prudent to wait for some follow-through buying beyond the mid-150.00s and the 150.85-150.90 region, or a multi-month top set last week, before positioning for any further gains. Spot prices might then climb to the 151.45 intermediate hurdle en route to the 152.00 neighbourhood, or a multi-decade peak set in October 2022 and retested in November 2023.

    On the flip side, weakness below the mid-149.00s could attract some buyers near the 149.25-149.20 area. This is followed by the 149.00 round figure and the 148.80-148.70 resistance-turned-support, which should act as a key pivotal point. A convincing break below the latter will suggest that the USD/JPY pair has formed a near-term top and set the stage for some meaningful corrective decline. The subsequent downfall has the potential to drag spot prices to the 148.35-148.30 region en route to the 148.00 mark and the 100-day Simple Moving Average (SMA) support near the 147.70 zone.

    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 Euro.

    USD   0.00% -0.01% -0.01% -0.04% 0.06% -0.12% -0.03%
    EUR 0.01%   0.00% 0.00% -0.03% 0.06% -0.11% -0.03%
    GBP 0.00% 0.00%   0.01% -0.03% 0.07% -0.11% -0.02%
    CAD 0.01% 0.00% -0.01%   -0.04% 0.05% -0.12% -0.02%
    AUD 0.05% 0.02% 0.03% 0.03%   0.09% -0.11% 0.00%
    JPY -0.06% -0.05% -0.06% -0.07% -0.09%   -0.18% -0.07%
    NZD 0.12% 0.11% 0.11% 0.12% 0.07% 0.19%   0.09%
    CHF 0.03% 0.03% 0.03% 0.03% 0.01% 0.09% -0.08%  

    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).

    Japanese Yen FAQs

    What key factors drive the Japanese Yen?

    The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

    How do the decisions of the Bank of Japan impact the Japanese Yen?

    One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, 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.

    How does the differential between Japanese and US bond yields impact the Japanese Yen?

    The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.

    How does broader risk sentiment impact the Japanese Yen?

    The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

    Isenção de responsabilidade: Apenas para fins informativos. O desempenho passado não é indicativo de resultados futuros.
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