The Japanese Yen (JPY) has maintained its sideways trajectory against the US Dollar (USD) as the European session commences on Monday, reflecting a consolidation within a familiar range persisting for approximately two weeks. This static movement is primarily attributed to the cautious stance adopted by the Bank of Japan (BoJ) and lingering uncertainties surrounding future rate hikes. Additionally, the prevalent risk-on sentiment in the market has continued to diminish the appeal of the safe-haven JPY. Despite this, prospects of potential government intervention to address excessive JPY depreciation have tempered bearish sentiments, deterring significant downward movement.
Conversely, the USD has encountered challenges in gaining substantial momentum amidst growing speculations of an imminent rate-cutting cycle by the Federal Reserve (Fed), anticipated to commence in June. This sentiment has been reinforced by the release of the US Personal Consumption Expenditures (PCE) Price Index, which further casts doubts on significant appreciation for the USD/JPY pair. As traders await the unveiling of crucial US macroeconomic data, commencing with the ISM Manufacturing PMI on Monday and culminating in the Nonfarm Payrolls (NFP) report on Friday, market dynamics remain poised for potential shifts.
BoJ’s Dovish Outlook Undermines Japanese Yen
The Bank of Japan’s dovish stance following its March meeting, characterized by the absence of guidance regarding future policy measures, has exerted downward pressure on the Japanese Yen. Moreover, encouraging data from China, including an expansion in manufacturing activity for the first time in six months, has bolstered investor confidence while contributing to the weakened status of the JPY. The BoJ’s Tankan survey unveiled a slight dip in business optimism among large manufacturers, contrasting with a positive outlook for large nonmanufacturers. Additionally, the au Jibun Bank Japan Manufacturing PMI indicated a tenth consecutive month of contraction, albeit with signs of improvement.
Japanese authorities have expressed vigilance regarding speculative JPY depreciation, with Finance Minister Shunichi Suzuki hinting at the readiness for intervention to curb excessive declines. Reports suggest a rescheduling of an emergency meeting to address this concern, highlighting the government’s proactive stance. Meanwhile, in the US, the latest PCE Price Index figures have fueled expectations of a June interest rate cut by the Federal Reserve, prompting a retreat in the USD from recent highs.
Technical Analysis: USD/JPY Eyeing Upside Breakout
From a technical perspective, the USD/JPY pair has demonstrated a consolidation phase following a bullish rally from the March swing low. Oscillators on the daily chart indicate a positive bias, albeit easing from overbought conditions, suggesting a potential upward trajectory. Immediate support lies at the 151.00 round figure, with further downside pressure possibly targeting the 150.85-150.80 zone. However, a decisive breach below this level may expose support levels near 150.25 and 150.00. Conversely, a breakout above the multi-decade high near 152.00 could pave the way for further gains. Traders are advised to exercise caution and await confirmation before positioning for additional movements.
