The Japanese Yen (JPY) fell for the second consecutive day, driven lower by a renewed recovery in the US Dollar (USD) from its recent two-month low. This shift lifted the USD/JPY pair back above the critical 150.00 psychological level during the Asian session on Tuesday.
Bank of Japan (BoJ) Governor Kazuo Ueda’s comments from last week have sparked volatility in the Japanese government bond (JGB) market, as he indicated that the BoJ could step up bond purchases if long-term interest rates rise sharply. This intervention has caused a pullback in JGB yields, weighing on the JPY. However, expectations for a hawkish BoJ may provide ongoing support for the yen, as investors anticipate further tightening in response to broadening inflationary pressures in Japan.
BoJ’s Stance on Rising Yields and Inflationary Pressures
Ueda’s remarks have prompted some market players to reassess their outlook on JGB yields, especially with the 10-year yield seen rising toward 1.5% in the near term. This is largely due to recent signs of persistent inflation, highlighted by Japan’s strong consumer inflation data and a 3.1% year-on-year rise in the Services Producer Price Index (PPI) for January. The BoJ’s readiness to raise interest rates amid these cost pressures has helped temper the JPY’s losses, but the currency remains under pressure due to Ueda’s comments about potentially ramping up bond purchases.
US Economic Data and Trump’s Tariff Concerns Affect USD Sentiment
While the USD has managed to recover, it faces some headwinds from weaker-than-expected US economic data. The US PMI readings for February showed slower business activity, while consumer sentiment dropped to a 15-month low. Additionally, concerns over the economic impact of US President Donald Trump’s import tariffs on Canada and Mexico have dampened investor confidence in the USD.
Despite this, the US Dollar has gained support from Federal Reserve officials, including Chicago Fed President Austan Goolsbee, who indicated that the central bank would hold off on rate cuts until there is more clarity on Trump’s tariff policies. This helped boost the USD, pushing the USD/JPY pair higher for the second day in a row.
Technical Outlook: USD/JPY Faces Resistance Near 150.90-151.00 Zone
From a technical perspective, the USD/JPY pair is testing resistance around the 150.90-151.00 region, a level that could attract fresh selling pressure. Should the pair break above this zone, it may trigger a short-covering rally, lifting the pair toward the 151.40 level, with the next key resistance at 152.00. However, a move beyond this point could be capped near the 152.65 area, where the 200-day Simple Moving Average (SMA) is positioned.
On the downside, the 149.65-149.60 area, which marks the low of the Asian session, offers immediate support. A break below this could lead to further declines toward 149.30, followed by the round 149.00 figure. A more significant drop below the 148.65 level, where the pair touched its lowest point since December 2024 on Monday, would likely trigger additional selling, with targets at 148.00 and 147.45, before potentially reaching the key 147.00 level.
Looking Ahead
As the market looks toward upcoming US data, including the Conference Board’s Consumer Confidence Index and the Richmond Manufacturing Index, all eyes will remain on the release of the US Personal Consumption Expenditure (PCE) Price Index on Friday. This data could offer fresh insights into the Fed’s future rate-cut path and further influence the USD/JPY pair’s trajectory in the coming days.
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