The Japanese Yen (JPY) struggles to capitalize on a modest intraday uptick against its American counterpart and hangs near a multi-decade low heading into the European session on Tuesday. The Bank of Japan (BoJ) indicated that it is in no rush in terms of policy normalization, while the Federal Reserve (Fed) is expected to keep interest rates higher for longer amid sticky inflation. This, in turn, suggests that the large gap in interest rates between the US and Japan will stay for some time, which, along with a generally positive risk tone, fails to assist the safe-haven JPY to attract any meaningful buyers.
The US Dollar (USD), on the other hand, remains well within the striking distance of its highest level since November touched last week and continues to draw support from hawkish Fed expectations. This further acts as a tailwind for the USD/JPY pair, though speculations that Japanese authorities will intervene to prop up the domestic currency might cap the upside. Traders also seem reluctant ahead of the crucial BoJ decision on Friday. This, along with the Advance US Q1 GDP print and the US Personal Consumption Expenditures (PCE) Price Index, will determine the near-term trajectory for the pair.
From a technical perspective, the Relative Strength Index (RSI) is still flashing overbought conditions on the daily chart and holding back the USD/JPY pair from placing fresh bets. Any further slide, however, is more likely to attract some dip-buyers near the 154.35-154.30 region. This should help limit the downside for spot prices near the 154.00 mark, which, if broken, might expose last Friday's swing low, around the 153.60-153.55 zone. The next relevant support is pegged near the 153.25-153.20 area and the 153.00 mark. A convincing break below the latter could prompt aggressive technical selling and drag the pair to the 152.50 intermediate support en route to a short-term trading range resistance breakpoint near the 152.00 round figure.
On the flip side, the multi-decade high, around the 154.85 region touched on Monday, followed by the 155.00 psychological mark, could act as an immediate hurdle. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and set the stage for an extension of a well-established appreciating trend from the March monthly swing low.
The Bank of Japan (BoJ) announces its interest rate decision after each of the Bank’s eight scheduled annual meetings. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and raises interest rates it is bullish for the Japanese Yen (JPY). Likewise, if the BoJ has a dovish view on the Japanese economy and keeps interest rates unchanged, or cuts them, it is usually bearish for JPY.
Read more.Next release: Fri Apr 26, 2024 03:00
Frequency: Irregular
Consensus: 0%
Previous: 0%
Source: Bank of Japan
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