Japanese Yen struggles below 150.00 against USD, remains vulnerable to slide further

The Japanese Yen ticks lower in the wake of the BoJ policy uncertainty and the risk-on mood.
Friday’s disappointing US data keeps the USD bulls on the defensive and might cap USD/JPY.
Traders look to the Tokyo CPI report on Tuesday ahead of this week’s key US economic data.

The Japanese Yen (JPY) remains on the back foot against its American counterpart during the Asian session on Monday, albeit lacks follow-through selling and manages to hold above the YTD low touched in February. The uncertainty over the Bank of Japan’s (BoJ) next policy move, along with the underlying bullish sentiment surrounding the equity markets, turn out to be key factors undermining the safe-haven JPY. However, reports that the Japanese government has begun considering declaring an official end to deflation keep hopes alive for an imminent shift in the BoJ’s policy stance in the coming months and help limit further losses.

Apart from this, subdued US Dollar (USD) price action, weighed down by Friday’s disappointing US macro data and less hawkish remarks by Federal Reserve (Fed) officials, contributes to capping the upside for the USD/JPY pair. Traders also seem reluctant to place aggressive directional bets and prefer to wait for the release of the Tokyo CPI report on Tuesday. Investors this week will also confront Fed Chair Jerome Powell’s congressional testimony on Wednesday and Thursday and important US macro data scheduled at the start of a new month, including the closely-watched US monthly jobs data, or the Nonfarm Payrolls (NFP) report on Friday.

Daily digest market movers: Japanese Yen struggles to attract buyers amid the unertain BoJ policy outlook

Mixed signals from Bank of Japan policy makers last week, along with the underlying bullish sentiment around the equity markets, continue to act as a headwind for the safe-haven Japanese Yen.
BoJ board member Hajime Takata said last week that the central bank must consider overhauling its ultra-loose monetary policy as the achievement of the 2% inflation target is becoming in sight.
BoJ Governor Kazuo Ueda, however, said it was too early to conclude that inflation was close to sustainably meeting the 2% target and stressed the need to scrutinize more data on the wage outlook.
Furthermore, a recession in Japan, along with a slightly warmer domestic consumer inflation, adds to the uncertainty about the BoJ’s future policy decisions and keeps the JPY traders on the sidelines.
Media reports, citing sources, suggest that the Japanese government has begun considering declaring an official end to deflation two decades after it acknowledged that prices were falling moderately
The US Dollar is undermined by Friday’s disappointing ISM Manufacturing PMI, which contracted more than anticipated and came in at 47.8 for February as compared to 49.1 in the previous month.
Other details of the report showed that the Employment Index declined to 45.9 from 47.1, the New Orders Index retreated to 49.2 from 52.5 and the Prices Paid Index edged lower to 52.5 from 52.9.
Adding to this, the University of Michigan’s Consumer Sentiment Index also fell short of estimates and dipped to 76.9 in February, though inflation expectations were in line with the expectations.
Fed Governor Adriana Kugler noted that progress on disinflation will continue, while Richmond Fed President Thomas Barkin said that overall inflation is likely to come down over the next few months.
Chicago Federal Reserve President Austan Goolsbee said that the policy rate is quite restrictive, and Dallas Fed President Lorie Logan said that it will be appropriate to slow the pace of the balance sheet shrinking.
The US Treasury bond yields declined on Friday after Fed Governor Christopher Waller’s comments, saying that he would like the central bank to boost its share of short-term Treasuries.
Investors now look forward to the release of the Tokyo CPI report on Tuesday for a fresh impetus, ahead of the month start key US macro data, including the crucial Nonfarm Payrolls on Friday.

Technical analysis: USD/JPY bulls not ready to give up yet, need to wait for a move beyond YTD peak

From a technical perspective, Friday’s failure ahead of the 150.80-150.90 pivotal resistance and the lack of any meaningful buying warrants some caution for bullish traders. The subsequent pullback, however, showed some resilience below the 150.00 mark. Moreover, oscillators on the daily chart are holding in the positive territory and support prospects for some meaningful upside for the USD/JPY pair. That said, it will still be prudent to wait for a sustained strength beyond the aforementioned barrier before placing fresh bullish bets. Spot prices might then climb to the 151.45 intermediate resistance 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, any meaningful downfall is likely to find decent support and attract fresh buyers near last week’s swing low, around the 149.20 area. Some follow-through selling, leading to a break below the 149.00 mark, might shift the bias in favour of bearish traders and make the USD/JPY pair vulnerable. Spot prices might then decline to the 148.30 support en route to the 148.00 round figure and the 100-day Simple Moving Average (SMA), currently pegged near the 147.80 region.

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 New Zealand Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		0.02%	0.00%	0.07%	0.07%	0.01%	0.10%	0.02%
EUR	-0.02%		-0.01%	0.05%	0.07%	0.00%	0.10%	0.00%
GBP	0.00%	0.01%		0.06%	0.08%	0.03%	0.11%	0.02%
CAD	-0.06%	-0.03%	-0.05%		0.02%	-0.05%	0.04%	-0.04%
AUD	-0.07%	-0.07%	-0.08%	-0.02%		-0.06%	0.03%	-0.06%
JPY	-0.02%	-0.01%	-0.06%	0.03%	0.03%		0.07%	-0.01%
NZD	-0.10%	-0.10%	-0.11%	-0.05%	-0.03%	-0.09%		-0.10%
CHF	-0.02%	0.00%	-0.02%	0.05%	0.07%	0.00%	0.10%

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).

Bank of Japan FAQs

The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.

The Bank’s massive stimulus 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. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.

A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.

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