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CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

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  • 20.03.2024 11:09
    USD/JPY should head down to the 145.00 area and probably close to 140.00 later this year – ING

    USD/JPY rallied on what in the end was a widely expected BoJ rate hike. Economists at ING analyze the pair’s outlook.

    More of a Dollar story

    The broad-based view is that the gulf in interest rates between Japan and many other central banks in the G10 space means that the Yen will still be used as a funding currency in a low-volatility world.

    Our baseline view now sees USD/JPY perhaps trading around the 150.00-152.00 area as long as short-term US rates stay firm. When they turn lower over the coming months, USD/JPY should head down to the 145.00 area and probably close to 140.00 later this year when the Fed easing cycle is in full swing (we look for 125 bps of Fed cuts this year).

  • 19.03.2024 15:13
    USD/JPY seen at 146.00 on a three-month view assuming a first Fed rate cut in June – Rabobank

    USD/JPY has risen back above the 150.00 level after the BoJ finally ended its negative interest rate policy. Economists at Rabobank analyze the pair’s outlook.

    BoJ prospects of hiking rates again this year remain highly uncertain

    In today’s policy statement, the BoJ remarked that as ‘indicated by the results of this year's annual spring labour-management wage negotiations to date, it is highly likely that wages will continue to increase steadily this year’. This has supported the Bank’s confidence that its price stability target is in sight. 

    Assuming the strong pay deals awarded to unionised workers spread out to the 70% of employees who are not in a union, Japan’s real wage growth could soon be turning higher. Policymakers will be hoping that this boosts consumption which in turns supports corporate profitability. This would indicate that the BoJ’s virtuous cycle is complete. So, while the BoJ may be able to hike rates again this year, this prospect currently remains highly uncertain. 

    Our three-month USD/JPY forecast of 146.00 assumes a first Fed rate cut in June and an improvement in Japanese real wage data. Our 12-month USD/JPY target is 140.00.

     

  • 19.03.2024 13:36
    USD/JPY: 152.00 now becomes a big psychological level going into Wednesday’s FOMC – SocGen

    USD/JPY rose back above 150.00 after the Bank of Japan abolished negative interest rates and yield curve control. Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes the pair’s outlook.

    A well-flagged BoJ move has emboldened Yen bears

    The BoJ brought the age of negative rates and yield curve control to an end. 

    I’m disappointed by the market reaction to the BoJ because there’s a good chance this eventually proves to be a pivotal moment for Japan and the BoJ. 

    USD/JPY 152.00 now becomes a big psychological level going into Wednesday’s FOMC.

     

  • 19.03.2024 12:59
    USD/JPY: Yen selling unlikely to persist – MUFG

    Economists at MUFG Bank analyze Japanese Yen (JPY) outlook after the Bank of Japan (BoJ) policy announcement.

    Will Yen selling persist after BoJ policy changes?

    We see limits to the extent of Yen selling that can take place from here. Of course, there are greater USD/JPY upside risks over the very short term given this risk event has now passed without any major hawkish surprise and if the FOMC on Wednesday were to drop a DOT in its policy rate profile, US yields will likely jump further and potentially drag USD/JPY to intervention levels. 

    But over the medium term, we view today’s announcements as hugely significant that is consistent with higher yields and a stronger Yen.

     

  • 19.03.2024 11:29
    Any big hawkish surprise from Fed Chair Powell could push USD/JPY beyond its 2022 high at 151.90 – TDS

    USD/JPY traded back above 150.00 after the BoJ exited its Negative Interest Rate Policy (NIRP). Economists at TD Securities analyze the pair’s outlook.

    BoJ exited NIRP and YCC simultaneously

    BoJ exited NIRP and YCC simultaneously and revamped its monetary policy framework around short-term interest rates. The Bank kept its QE program and signalled that it will make nimble responses to any spike in long-run interest rates. Our confidence around an October hike has lessened after Governor Ueda's dovish comments and the recent economic data.

    USD/JPY is now hostage to the FOMC decision on Wednesday and any big hawkish surprise from Powell could push USD/JPY beyond its 2022 high at 151.90 which may invoke some strong verbal interventions from the MoF.

     

  • 18.03.2024 19:53
    USD/JPY coils just above 149.00 ahead of BoJ, Fed action
    • Heavy week for USD/JPY with BoJ and Fed in the barrel.
    • Bank of Japan widely anticipated to pivot away from negative rates.
    • Fed to update Dot Plot of interested rate expectations on Wednesday.

    USD/JPY is churning chart paper just above the 149.00 handle as investors gear up for a central-bank-heavy week. The Bank of Japan (BoJ) is expected to deliver an update on its negative interest rate regime early in the Tuesday market session after Japan’s spring wage negotiations showed the highest wage increases in over three decades. The Federal Reserve (Fed) is also expected this week and will drop its latest Dot Plot summary of interest rate projections on Wednesday.

    The BoJ widely telegraphed that any moves on interest rates would hinge on the results of spring wage negotiations in Japan. Union-negotiated wage increases soared over 5% this year, a 31-year high. Market hopes of rate hikes from the BoJ have pinned into the high side, and uncorroborated reports from the Nikkei news service in Japan insist that the BoJ has already agreed internally to raise interest rates to a 0.0-0.1% range. Japan’s main reference rate is currently near -0.1%. The BoJ is expected to drop its latest rate call sometime early Tuesday.

    The Fed will hit markets with its latest rate call on Wednesday, to be followed by another press conference from Fed Chairman Jerome Powell. The Fed will also update its Dot Plot summary of interest rate projections. Rate-cut-hungry markets are increasingly worried the Fed is going to ease back on rate cut expectations. The Fed’s last Dot Plot suggested a median forecast of three rate cuts through 2024, totaling around 75 basis points in rate slashing by the end of the year. Money markets entered 2024 expecting a whopping six or seven rate cuts totaling an eye-watering 175-200 basis points.

    As the US economy proves far more resilient than rate watchers expected, and US inflation remains stickier than hoped, rate futures markets have been knocked firmly back, with rate expectations falling to match the Fed’s own Dot Plot in March. According to the CME’s FedWatch Tool, markets were pricing in nearly 70% odds of a first rate cut from the Fed in June as recently as last week. That number has eased to around 50-50 odds on Monday.

    US Purchasing Manager Index (PMI) figures are due in the back half of the trading week, as well as Japanese Trade Balance numbers on Thursday followed by Japanese National Consumer Price Index (CPI) follow-up inflation numbers early Friday.

    USD/JPY technical outlook

    USD/JPY is broadly flat on Monday, testing the waters just north of the 149.00 handle. The pair pushed into the north side of a descending 200-hour Simple Moving Average (SMA) last week, which is settling into the 148.00 region. 151.00 remains a key technical ceiling in the near term, and intraday momentum remains in the hands of the bulls with the pair bouncing into a recovery from 146.50.

    USD/JPY hourly chart

    USD/JPY

    Overview
    Today last price 149.16
    Today Daily Change 0.09
    Today Daily Change % 0.06
    Today daily open 149.07
     
    Trends
    Daily SMA20 149.4
    Daily SMA50 148.42
    Daily SMA100 147.54
    Daily SMA200 146.4
     
    Levels
    Previous Daily High 149.16
    Previous Daily Low 148.04
    Previous Weekly High 149.16
    Previous Weekly Low 146.49
    Previous Monthly High 150.89
    Previous Monthly Low 145.9
    Daily Fibonacci 38.2% 148.73
    Daily Fibonacci 61.8% 148.47
    Daily Pivot Point S1 148.35
    Daily Pivot Point S2 147.63
    Daily Pivot Point S3 147.22
    Daily Pivot Point R1 149.48
    Daily Pivot Point R2 149.89
    Daily Pivot Point R3 150.61

     

     

  • 18.03.2024 14:13
    USD/JPY: A BoJ hike can trigger a correction to levels below 148.00 – ING

    The Bank of Japan’s hike or hold decision is a 50-50 affair. Economists at ING analyze how the BoJ policy announcement could impact the Japanese Yen (JPY).

    The Yen still needs help from USD rates

    This will be a binary event for the Yen, given that markets are pricing in around a 50-60% implied probability of a hike this week. Expectations are also for a rate hike to be accompanied by the end of the yield curve control policy, even though the BoJ may well keep its bond-buying programme intact to avert excess bond market volatility. 

    A hold should push USD/JPY, which can cause the pair to test 150.00, while a hike can trigger a correction to levels below 148.00.

    Our view remains that USD/JPY will trade lower from the second quarter, but that relies on lower USD rates as much as a BoJ hike.

     

  • 18.03.2024 13:39
    USD/JPY holds strength above 149.00 ahead of BoJ-Fed policy decisions
    • USD/JPY clings to gains above 149.00 as the BoJ seems to be delaying plans of exiting an ultra-dovish policy stance.
    • Earlier, large hikes awarded by Japanese firms and stable inflation above 2% boosted BoJ’s rate hike hopes.
    • The US Dollar trades sideways as the focus shifts to Fed policy.

    The USD/JPY pair exhibits strength above the crucial support of 149.00 in the early New York session. The asset clings to gains as market expectations for the Bank of Japan (BoJ) delaying its plans to exit negative interest rates and scrap Yield Curve Control (YCC) have escalated.

    Big Japanese firms have rewarded historic wage growth, and inflation has remained sticky above the desired target of 2%, providing confidence to BoJ policymakers to put an end to the expansionary interest rate stance.

    The factor that is limiting hopes for BoJ's increasing interest rates is the absence of a catalyst, which could ensure a wage-price spiral. Investors seem confident that the BoJ will end its ultra-loose policy stance in April by raising interest rates from negative 0.1% to 0.1%.

    Meanwhile, the market sentiment improves on upbeat China’s Retail Sales and Industrial Production data for February. Higher than anticipated China’s exhibit a strong recovery in its domestic economy. S&P500 futures have generated significant gains in the European session, portraying an improvement in the risk appetite of the market participants.

    The US Dollar Index (DXY) trades sideways around 103.40 as investors shift focus to the Federal Reserve's (Fed) interest rate decision, which will be announced on Wednesday. The Fed is expected to keep interest rates unchanged in the range of 5.25%- 5.50%. Investors will focus on the dot plot that presents policymakers’ projections for interest rates over time and economic projections.

    USD/JPY

    Overview
    Today last price 149.2
    Today Daily Change 0.13
    Today Daily Change % 0.09
    Today daily open 149.07
     
    Trends
    Daily SMA20 149.4
    Daily SMA50 148.42
    Daily SMA100 147.54
    Daily SMA200 146.4
     
    Levels
    Previous Daily High 149.16
    Previous Daily Low 148.04
    Previous Weekly High 149.16
    Previous Weekly Low 146.49
    Previous Monthly High 150.89
    Previous Monthly Low 145.9
    Daily Fibonacci 38.2% 148.73
    Daily Fibonacci 61.8% 148.47
    Daily Pivot Point S1 148.35
    Daily Pivot Point S2 147.63
    Daily Pivot Point S3 147.22
    Daily Pivot Point R1 149.48
    Daily Pivot Point R2 149.89
    Daily Pivot Point R3 150.61

     

     

  • 18.03.2024 07:55
    BoJ Preview: Four scenarios and their implications for USD/JPY – TDS

    Economists at TD Securities discuss the Bank of Japan (BoJ) Interest Rate Decision and their implications for the USD/JPY pair.

    On Hold – Dovish (10%)

    The BoJ states that the economy is not strong enough and the Bank needs to be patient judging by the moderation in real household spending and Q4 GDP numbers. Ueda may remark that the BoJ needs to wait for the wage outcomes from small-medium enterprises given that they hire 70% of Japan's workforce. In this instance market is likely to view a July hike as the earliest possible time to move. USD/JPY +1.4%.

    On Hold – Hawkish (10%)

    The Bank would need to signal to the market that its confidence to hike is high and that its commitment to hike in April is strong. Otherwise, the market will believe the BoJ is likely to be on hold for at least three months. USD/JPY +0.8%.

    Base Case: 10 bps hike – Measured tone (60%)

    The significant wage outcome from Rengo gives the BoJ the confidence to move in March. Earlier, the BoJ indicated that the policy adjustment to hike will not be rapid, so hiking a month earlier vs consensus should not be a big deal. We expect the BoJ to officially discontinue the Yield Curve Control (YCC) framework, but retain its Q1 bond buying pace. USD/JPY -1.8%.

    Hike – Hawkish (5%)

    BoJ indicates that current financial conditions are too accommodative and may tighten policy further to prevent real rates from going too negative. Possible actions include faster hikes or a surprise announcement of a QT plan. However, both possibilities run counter to recent BoJ messaging to not surprise the market. USD/JPY -2.7%.

     

  • 15.03.2024 13:45
    BoJ Preview: An actual pivot away from NIRP can easily haul the USD/JPY towards 145.00 – TDS

    Speculation around a BoJ monetary policy shift has been building. Economists at TD Securities bring forward their call for an April hike to March.

    BoJ to hike next week

    Following the positive round of wage increases announced this week and Rengo's announcement today delivering a 5% increase in first round wage negotiations, we believe the BoJ has the information it needs to hike at next week's meeting. Accordingly, we bring forward our call for an April hike to March.

    We expect USD/JPY's reaction function to be asymmetric here with a bigger move on delivering a hike (USD/JPY towards 145.00) than on a disappointment (towards 150.00) as even in the latter the BoJ can try to sound hawkish and lay the grounds for an April pivot.

     

  • 15.03.2024 13:39
    USD/JPY extends upside to 149.00 as focus shifts to BoJ, Fed policy
    • USD/JPY jumps to 148.80 on hopes that the BoJ will maintain its ultra-loose monetary policy stance on Tuesday.
    • The BoJ lacks a significant wage-price spiral to back an exit to negative interest rates.
    • Diminished Fed rate cut expectations keep the US Dollar strong near its three-week highs around 103.50.

    The USD/JPY climbs to 148.80 in the late European session on Friday as the Japanese Yen weakens on expectations that the Bank of Japan (BoJ) will not end the expansionary policy stance in the meeting on Tuesday.

    Plenty of fundamentals favor the BoJ quitting negative interest rates. BoJ’s favourite inflation measure, the Consumer Price Index (CPI), excl. fresh food has remained above the 2% target for a longer period. Meanwhile, Japan's biggest companies agreed with labor unions to raise wages by the highest level in 33 years, reported Reuters.

    In addition, Japan's Finance Minister Shunichi Suzuki said early Friday that the economy is no longer in deflation and that the government will mobilize all policy steps available to continue the strong trend of wage hikes this year. However, investors hope the BoJ will not go for exiting the prolonged expansionary policy stance as a full-proof plan for the wage-price spiral remains absent.

    Market participants will keenly focus on the BoJ’s press conference about when the central bank will scrap its negative interest rates and Yield Curve Control (YCC). Earlier, BoJ Governor Kazuo Ueda said policymakers will debate whether the outlook is bright enough to phase out the massive monetary stimulus.

    Meanwhile, market sentiment remains cautious as stubborn United States inflation has dented expectations for the Federal Reserve (Fed) to reduce interest rates from the June meeting. Surprisingly stubborn US Producer Price Index (PPI) data for February is expected to allow Fed policymakers to argue to keep interest rates higher for a longer period.

    The US Dollar Index (DXY) is holding near its three-week high of around 103.50. Ten-year US Treasury yields are extending their upside to 4.31%.

    USD/JPY

    Overview
    Today last price 148.89
    Today Daily Change 0.56
    Today Daily Change % 0.38
    Today daily open 148.33
     
    Trends
    Daily SMA20 149.46
    Daily SMA50 148.34
    Daily SMA100 147.54
    Daily SMA200 146.35
     
    Levels
    Previous Daily High 148.36
    Previous Daily Low 147.43
    Previous Weekly High 150.57
    Previous Weekly Low 146.48
    Previous Monthly High 150.89
    Previous Monthly Low 145.9
    Daily Fibonacci 38.2% 148.01
    Daily Fibonacci 61.8% 147.79
    Daily Pivot Point S1 147.72
    Daily Pivot Point S2 147.11
    Daily Pivot Point S3 146.8
    Daily Pivot Point R1 148.65
    Daily Pivot Point R2 148.97
    Daily Pivot Point R3 149.58

     

     

  • 15.03.2024 12:14
    USD/JPY: Scope to trend lower to 146.00 on a three-month view – Rabobank

    Economists at Rabobank analyze the Japanese Yen (JPY) outlook ahead of next week’s BoJ policy meeting.

    Risk of a near-term pullback

    If the BoJ does exit its negative interest rate policy on March 19, likely, rates will only be raised by 10 or 15 bps. Additionally, at best the tone of the BoJ’s guidance next week is likely to be one of cautious optimism. Importantly, even after the negative policy rate has been consigned to the economic history books, Japan’s monetary policy settings are likely to remain accommodative. 

    A very guarded tone from the BoJ on the outlook for further policy moves would raise the risk that the JPY could suffer a ‘sell on the fact’ reaction to a BoJ policy change on March 19. That said, despite the risk of a near-term pullback, we continue to see scope for USD/JPY to trend lower to 146.00 on a three-month view.

     

  • 15.03.2024 11:15
    USD/JPY will likely remain well supported above its 200-DMA at 146.39 – BBH

    The Japanese Yen (JPY) got whipsawed following the significantly higher trade union wage hikes. Economists at BBH analyze Yen’s outlook.

    Significant higher trade union wage hikes

    Japan’s Rengo, the largest trade union, agreed on total pay increases averaging 5.28% in 2024. This is up from 3.8% in 2023 and higher than the 4.1% rise expected by a Bloomberg survey of economists. 

    The probability implied by interest rate futures (OIS) of a 10 bps Bank of Japan (BoJ) policy rate hike next week rose briefly to a high around 70% before settling back down around 60%. 

    In our view, Japan’s improving inflation backdrop and soft economic activity suggest the BoJ is unlikely to normalise the policy rate by more than is currently priced-in over 2024 (25 bps total rate hikes). As such, USD/JPY will likely remain well supported above its 200-DMA at 146.39.

     

  • 15.03.2024 07:25
    USD/JPY: Risks are tilted to the downside for forecast of 145.00 by end-Q2 – Standard Chartered

    Economists at Standard Chartered expect the Bank of Japan (BoJ) to end its negative interest rate policy (NIRP) in March rather than April, alongside a de facto removal of yield curve control (YCC). They analyze the implications for the Japanese Yen (JPY).

    Potential end to YCC accompanied by a greater tolerance for higher long-end yields should be JPY-positive

    While the JPY has rallied and markets are already pricing in 6 bps of hikes by April, we think the BoJ could surprise with an earlier move in March. Even if the BoJ does not hike in March, the market would expect it to hike in April; market reaction should therefore be limited either way. 

    The removal of NIRP will not reverse negative yield differentials with other DMs, given that the anticipated policy adjustment in March is unlikely to signal the start of an aggressive rate hiking cycle by the BoJ. Nevertheless, a potential end to YCC accompanied by a greater tolerance by the BoJ for higher long-end yields should ultimately be JPY-positive, especially if our expectation for the Fed and ECB to start cutting rates from June pans out. 

    In that vein, risks are tilted to the downside for our USD/JPY forecast of 145.00 by the end of Q2-2024.

     

  • 14.03.2024 16:20
    USD/JPY rallies on US data, Friday wage survey key to BoJ decision
    • USD/JPY surges after US inflation data comes out hotter than expected. 
    • Upside could be capped, however, by expectations of an impending rate cut by the BoJ. 
    • The outcome could depend on the results of a preliminary survey of wage agreements published Friday. 

     

    USD/JPY is trading in the lower 148.00s during the US session on Thursday, up over a third of percentage point after the release of US macroeconomic data.

    An unexpected rise in US Producer Prices (PPI) indicates inflation remains stubbornly high and the Federal Reserve (Fed) will need to keep interest rates elevated for longer to combat it. 

    The maintenance of higher interest rates is positive for the US Dollar (USD) and USD/JPY, because relatively higher interest rates attract greater inflows of foreign capital.   

    Previously, markets had been pricing in the possibility of the Fed cutting interest rates in May or June, however, following the release of Thursday’s PPI data, the probability of the rate cut in May has dwindled to 9%, according to the CME Group’s FedWatch Tool, which calculates the probabilities of changes in the Fed Funds Rate based on the price of Fed Funds Futures.

    The probability of a June rate cut remains relatively high at 62%, but still down from over 70% recorded a few days ago.  

    Upside for the USD/JPY could be capped by expectations the Bank of Japan (BoJ) will raise interest rates at their March meeting next Tuesday. Such a move would end decades of ultra-loose policy and be the first time since February 2007 the bank has increased interest rates. The expected move comes after higher inflation in Japan and the potential for further price pressures after a series of higher wage agreements between major labor unions and employers. 

    The Chairman of the Bank of Japan, Kazuo Ueda has consistently said that he will only agree to higher interest rates if the inflation rate sustainably reaches the BoJ’s 2.0% target. Currently headline inflation sits above the target at 2.2% whilst core inflation is at 2.0% – exactly at the target level – from 2.3% in the previous month.  

    The BoJ has said its decision whether or not to raise rates next Tuesday could hinge on the preliminary results of a survey of big firms' wage talks published on Friday, March 15, according to the Asahi Shimbun.    

     

  • 14.03.2024 11:20
    USD/JPY trades sideways near 147.50 with eyes on US data
    • USD/JPY trades lacklustre near 147.50 ahead of US PPI, Retail Sales data.
    • The US bond yields drop amid improved market sentiment.
    • The uncertainty over BoJ quitting negative rates deepens.

    The USD/JPY pair consolidates in a tight range around 147.70 in Thursday’s European session. The asset struggles to find a direction as investors stay on the sidelines ahead of the United States Producer Price Index (PPI) and Retail Sales data for February, which will be published at 12:30 GMT. The economic data will provide fresh guidance on interest rates as it could influence the inflation outlook.

    The monthly Retail Sales are forecasted to have grown by 0.8% after declining at the same pace in January. It is expected that robust demand for automobiles and higher sales at gasoline stations boosted the Retail Sales data. An upbeat Retail Sales data would dampen bets in favor of Federal Reserve (Fed) rate cuts in the June policy meeting.

    Currently, the CME FedWatch tool shows that there is a 69% chance that a rate cut will be announced in June. For the March and May policy meeting, the Fed is expected to keep interest rates unchanged in the range of 5.25%-5.50%.

    S&P 500 futures generate significant gains in the London session, indicating a sharp improvement in the risk appetite of the market participants. The 10-year US Treasury yields surrender its entire gains, trades around 4.19%. The US Dollar Index (DXY) is broadly sideways around 102.80 ahead of the US data.

    Meanwhile, the Japanese Yen remains under pressure as investors hope that the Bank of Japan (BoJ) will postpone its plans to exit negative interest rates. BoJ Ueda said on Tuesday that the economy has recovered on a few economic grounds, though consumption remains weak. Finance Minister Shunichi Suzuki said separately that Japan was not at a stage where it could declare a victory over deflation.

     

  • 13.03.2024 13:37
    USD/JPY rises to 148.00 as uncertainty over BoJ quitting negative rates deepen
    • USD/JPY bounces back to 148.00 in hopes that the BoJ could delay rate hike plans.
    • BoJ Ueda is worried about subdued consumption that has pushed back rate hike expectations.
    • Market expectations for the Fed reducing interest rates in June have eased.

    The USD/JPY pair rebounds to crucial resistance of 148.00 as investors hope that the Bank of Japan (BoJ) will delay its plans to quit negative interest rates. The asset recovers as optimism over BoJ hiking interest rates in the March policy meeting wanes, and stubborn United States inflation data for February has dents hopes of the Federal Reserve (Fed) reducing interest rates in June.

    The commentary from BoJ Ueda and FM Suzuki has dampened market expectations for BoJ exiting the negative rates. BoJ Ueda said on Tuesday that the economy has recovered on a few economic grounds though consumption remains weak. Finance Minister Shunichi Suzuki said separately that Japan was not at a stage where it could declare a victory over deflation.

    The market sentiment remains slightly cautious as US Treasury Yields rise to 4.18% on expectations that the Fed will hold interest rates higher for some time longer than what previously anticipated. The US Dollar Index (DXY) is slightly down at 102.85 even though expectations for the Fed reducing interest rates in the June meeting have eased.

    According to the CME Fedwatch tool, the chances of a rate cut have dropped to 65%, from above 72% before the release of February’s inflation report.

    Meanwhile, investors shifted focus to the US Retail Sales data for February, which will be published on Thursday. The monthly Retail Sales are expected to have increased by 0.8%, against a decline of 0.8% in January. An upbeat Retail Sales data will exhibit resilient consumer spending, which could prompt expectations for the Fed to keep interest rates unchanged in the first half of this year.

     

  • 12.03.2024 13:56
    USD/JPY Price Analysis: Possibly in a sweet spot for sellers
    • USD/JPY rebounds into a key resistance zone after the release of stickier-than-expected US CPI data. 
    • The pair has hit a tough ceiling where two major moving averages converge. 
    • USD/JPY is at risk of rolling over and continuing its short-term downtrend. 

    USD/JPY rebounds after the release of higher-than-forecast US Consumer Price Index (CPI) data for February. The data increases the probability the Federal Reserve will retain interest rates at their current relatively high levels for longer. Higher interest rates are a positive for a currency since they result in higher capital inflows. 

    USD/JPY has rallied off of the data and run into a substantial resistance zone made up of two major moving averages: the 50 (red) and 100-day (blue) Simple Moving Averages (SMA). Given the overall short-term trend is bearish and still assumed intact, the pullback could provide sellers with the perfect opportunity to short the currency pair. 

    US Dollar vs Japanese Yen: Daily chart

    Impact of CPI on US Dollar could be temporary

    Although the CPI data beat estimates most of the upside was mainly due to higher Gasoline prices which are seen as a variable inflationary pressure that is less likely to endure. This suggests upside for the US Dollar (USD) – and the USD/JPY – is likely to be tempered and short-lived. 

    The Yen is supported by expectations and rumors swirling that the Bank of Japan (BoJ) will soon raise its base interest rates from negative levels. Some even hypothesize the country could be exiting the moribund growth trend of the last 30 years.  This has been responsible for the USD/JPY’s recent descent.   



    US Dollar vs Japanese Yen: 4-hour chart

    Given the pair remains in a short-term downtrend despite the pullback of recent days, it is vulnerable to eventually rolling over and falling again. 

    There are no indications on the 4-hour chart above that the pullback higher has ended, however, so it remains too early to say with any certainty whether the pair will start going lower again. Some sort of candlestick reversal pattern would ideally form to warn traders of a resumption of downside, but this has not yet happened.

    If the pair does revolve lower, however, it is likely to fall back down to the 146.48 March 8 lows. 

    If USD/JPY breaks below the 146.48 lows it will probably fall to support at the 146.22 and the 200-day SMA, followed by 145.89, the February 1 low. 

     

  • 12.03.2024 09:22
    USD/JPY has risen in the first hour after the last three US CPI report releases by an average of +0.57% – MUFG

    The performance of USD/JPY will be driven today by the release of the latest US Consumer Price Index (CPI) report for February, economists at MUFG Bank say.

    Another upside inflation surprise would more seriously challenge the Fed’s outlook for inflation to continue to slow

    After the upside inflation surprise in January, the February CPI report could prove even more important for Fed rate cut expectations and the US Dollar. Another upside inflation surprise at the start of this year would more seriously challenge the Fed’s outlook for inflation to continue to slow.

    Looking back at the performance of USD/JPY just after the release of US CPI reports, there has been a clear trend for USD/JPY to strengthen in recent months. USD/JPY has risen in the first hour after the last three US CPI report releases by an average of +0.57%. The biggest move was after the last US CPI report released in February when USD/JPY rose by +0.73%. 

    The Bloomberg consensus forecast is expecting core CPI to increase by 0.3% MoM in February after the firmer print of 0.4% MoM in January which would bring it back more into line with the average rate during the 2H of last year.

     

  • 12.03.2024 08:42
    USD/JPY rebounds to 147.50 as BoJ rate hike bets wane, US Inflation eyed
    • USD/JPY bounces back to 147.50 as BoJ rate hike bets ease.
    • BoJ Ueda doubts Japan’s economic strength amid weak consumption.
    • Fed policymakers would confirm that inflation will return to 2% before considering rate cuts.

    The USD/JPY pair recovers to 147.50 after a two-day consolidation in the European session on Tuesday. The asset rebounds as the Japanese Yen weakens after Bank of Japan (BoJ) voiced doubts over Japan’s economic outlook.

    BoJ Ueda said in Tuesday’s Asian session that the economy is recovering on a few economic grounds as consumption remains weak. Also, Finance Minister Shunichi Suzuki said separately that Japan was not at a stage where it could declare a victory over deflation. The commentary from BoJ Ueda and FM Suzuki has dampened market expectations for the BoJ exiting the negative rates.

    The expectations for BoJ quitting the expansionary policy stance were significantly higher before BoJ Ueda’s commentary as the revised estimate for Japan’s Q4 Gross Domestic Product (GDP) shows that the economy was not in a technical recession in the second half of 2023. The revised estimates show that the economy grew by 0.1% against a degrowth of 0.1% indicated from the preliminary estimates.

    Also, a few BoJ policymakers expressed optimism for a positive wage cycle, which could keep inflation sustainably above the desired rate of 2%.

    Meanwhile, the market sentiment remains upbeat ahead of the United States Consumer Price Index (CPI) data for February, which will be published at 12:30 GMT. The inflation data will provide a fresh outlook on the US interest rates. Federal Reserve (Fed) policymakers want to see inflation data easing for months as evidence before considering a dovish interest rate decision.

     

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