- The Japanese Yen drops to losing ground for the third successive day on Wednesday.
- The uncertainty over the BoJ’s future policy steps continues to undermine the JPY.
- A modest USD uptick lends additional support to USD/JPY and favours bullish traders.
The Japanese Yen (JPY) remains under some selling pressure for the third straight day on Wednesday and drops to the 152.00 neighbourhood against its American counterpart, or a fresh multi-decad low during the Asian session. The Bank of Japan (BoJ) struck a dovish tone at the end of the March policy meeting and stopped short of offering any guidance about future policy steps, or the pace of policy normalization. This, in turn, is seen as a key factor undermining the JPY, which, along with some follow-through US Dollar (USD) buying, provides a goodish lift to the USD/JPY pair.
In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, climbs back closer to a multi-week top touched last week amid the optimistic outlook for the US economy. The view was validated by Tuesday’s slightly better-than-expected release of US Durable Goods Orders data, which, along with sticky inflation, might force the Federal Reserve (Fed) to keep interest rates higher for longer. This remains supportive of elevated US Treasury bond yields and continues to benefit the USD, though verbal intervention by Japanese authorities might cap the USD/JPY pair.
Daily Digest Market Movers: Japanese Yen drops to fresh multi-decade low amid the BoJ’s dovish outlook
- The Bank of Japan indicated that it intends to maintain an accommodative monetary policy for an extended period at the end of the March meeting, which continues to undermine the Japanese Yen.
- The view was echoed by BoJ Board Member Tamura Naoki on Wednesday, who added that the bank will guide monetary policy appropriately in accordance with economic, price, and financial developments.
- Japan’s top currency diplomat, Masato Kanda, said on Tuesday that the current JPY weakness does not reflect fundamentals and labelled the recent moves as speculative, showing readiness to respond to volatility.
- Japan’s finance minister Shunichi Suzuki offered some verbal intervention on Wednesday, saying that he would not rule out any measures to cope with the weakening currency and disorderly FX moves.
- The US Dollar adds to the previous day’s modest gains that followed the release of the upbeat Durable Goods Orders data, which registered a growth of 1.4%, slightly more than expected in February.
- Separately, the Conference Board reported that the US Consumer Confidence Index dipped to 104.7 in March, little changed from the previous month’s reading of 104.8 amid fading fears of a recession.
- Furthermore, consumers’ inflation expectations ticked up to 5.3% during the reported month from 5.2% in February, which might force the Federal Reserve to keep interest rates higher for longer.
- Traders, however, seem reluctant to place aggressive direction bets and prefer to wait for Friday’s release of the crucial US Personal Consumption and Expenditure (PCE) Price Index data.
Technical Analysis: USD/JPY once again faces rejection near the 152.00 mark, dip-buying to limit the downside
From a technical perspective, some follow-through buying, leading to a move beyond the YTD peak and the 152.00 mark, will be seen as a fresh trigger for bullish traders. Given that oscillators on the daily chart are holding comfortably in the positive territory, the USD/JPY pair might then prolong its well-established uptrend witnessed since January 2023 and climb further towards the 153.00 round figure.
Meanwhile, any corrective decline might now be seen as a buying opportunity and remain limited near the 151.00 mark. A convincing break below, however, might expose the next relevant support near the 150.25 region. This is closely followed by the 150.00 psychological mark, which, if broken decisively, could make the USD/JPY pair vulnerable to accelerate the corrective decline further towards the 149.35-149.30 region en route to the 149.00 mark.
