The Japanese Yen (JPY) sustains its downtrend against the US Dollar (USD) for the second consecutive day, lingering near multi-decade lows as the European session approaches. The cautious stance adopted by the Bank of Japan (BoJ) and uncertainty regarding further policy tightening serve as prominent factors contributing to the JPY’s weakened position. Additionally, ongoing USD strength aids the USD/JPY pair, attracting buying interest around the mid-151.00s.
Despite the prevailing weakness, downside momentum for the JPY is somewhat curbed following recent verbal intervention by Japanese authorities. This, coupled with a generally subdued sentiment in equity markets, provides a degree of support for the safe-haven JPY, potentially limiting significant appreciation for the USD/JPY pair. Traders now direct their attention to the US economic calendar, particularly focusing on JOLTS Job Openings and Factory Orders data, along with speeches by influential Federal Open Market Committee (FOMC) members, for fresh market cues.
Market Analysis: Japanese Yen Faces Pressure Amid BoJ’s Dovish Outlook
The Japanese Yen confronts ongoing pressure due to the BoJ’s dovish stance, although speculations of potential intervention by Japanese authorities temper some of the currency‘s losses. Finance Minister Shunichi Suzuki’s reiterated warnings regarding rapid JPY movements further underscore Japan’s commitment to addressing excessive volatility. Moreover, reports of Israeli airstrikes on Iran’s embassy in Syria heighten geopolitical tensions, bolstering demand for the JPY as a safe-haven asset.
Investors’ sentiment regarding US interest rates shifts following the Institute for Supply Management’s report, indicating expansion in the US manufacturing sector after 16 consecutive months of contraction. Consequently, US Dollar strength is reinforced, leading to an uptick in yields on US government bonds and supporting the USD/JPY pair.
Technical Analysis: Outlook for USD/JPY
Technically, the USD/JPY pair exhibits a consolidative phase following a robust rally from March lows. Oscillators on the daily chart signal a positive bias, suggesting further upside potential. However, a decisive breach of the multi-decade high near 152.00 is awaited to confirm sustained bullish momentum. On the downside, support is anticipated around the 151.00 mark, with resistance observed at 150.85-150.80. A break below 150.00 may expose further downside towards 149.35-149.30, followed by 149.00.
Overall, while the JPY faces headwinds from the BoJ’s cautious stance, geopolitical tensions, and USD strength, technical indicators suggest a potential for further gains in the USD/JPY pair, contingent upon key resistance levels being breached.
