The Japanese Yen (JPY) finds itself under continued selling pressure for the second consecutive day on Monday, hovering just above multi-decade lows as the European session approaches. The cautious stance of the Bank of Japan (BoJ) towards further policy tightening suggests a persistent gap between US and Japanese interest rates. This, coupled with easing geopolitical tensions and a prevailing positive risk sentiment, steers the safe-haven JPY away from its over two-week high against the US Dollar observed last Friday.
Moreover, the upbeat US jobs report released on Friday indicates a potential delay in interest rate cuts by the Federal Reserve (Fed), reinforcing support for elevated US Treasury bond yields. Consequently, this bolsters demand for the US Dollar (USD), contributing to the strengthening of the USD/JPY pair. However, speculations regarding potential intervention by Japanese authorities to curb further weakness in the JPY may limit gains for the currency pair, particularly ahead of significant data releases from the US scheduled for this week.
Market observers note that the BoJ’s cautious approach towards policy tightening, combined with softer wage data from Japan, has exerted downward pressure on the Japanese Yen for consecutive days. Following the March monetary policy meeting, the BoJ refrained from offering guidance on future steps or the pace of policy normalization, adopting a dovish tone.
Additionally, data from the labor ministry revealed a 1.3% year-on-year decline in Japanese workers’ inflation-adjusted real wages in February, further contributing to the weakening sentiment surrounding the JPY. Although Japan’s current account showed an increase to 2.64 trillion Yen in February, it fell short of consensus estimates.
On the geopolitical front, reports suggesting progress in Gaza ceasefire talks have bolstered investor confidence and weakened demand for safe-haven assets like the JPY. Despite continued verbal interventions by Japanese government officials to defend the domestic currency, little impact has been observed on JPY bulls or the upward movement of the USD/JPY pair.
Meanwhile, the focus shifts to the upcoming release of US consumer inflation figures for March, followed by the Federal Open Market Committee (FOMC) meeting minutes. Investors seek clarity on potential Fed rate cuts in 2024 before positioning for the next directional move in both the USD and the USD/JPY pair.
From a technical standpoint, bulls await sustained strength above the 152.00 mark to regain control. Conversely, the 151.30 horizontal zone acts as immediate support, followed by the 151.00 mark. A breach below these levels could lead to further downside towards the 150.30 region, with a decisive break below 150.00 favoring bearish traders. Subsequent support levels lie at 149.35-149.30, eventually targeting the 149.00 mark.
