The Japanese Yen (JPY) continues losing ground against its American counterpart and drops to a fresh multi-decade low, around the 155.70-155.75 region heading into the European session on Thursday. The Bank of Japan (BoJ) has indicated that it is in no rush in terms of policy normalization, while the Federal Reserve (Fed) is expected to delay cutting interest rates in the wake of still sticky inflation. This, in turn, suggests that the wide interest-rate differential between Japan and the United States (US) will remain for some time, which, in turn, is seen as a key factor driving flows away from the JPY.
Meanwhile, the overnight slump below the 155.00 psychological mark raises the risk of an imminent intervention by Japanese authorities to stem any further JPY weakness, albeit does little to ease the bearish pressure. That said, the emergence of some US Dollar (USD) selling keeps a lid on any further appreciating move for the USD/JPY pair ahead of Thursday's release of the Advance US Q1 GDP report. The focus, however, will remain glued to the crucial BoJ decision on Friday and the US Personal Consumption Expenditures (PCE) Price Index, which should provide a fresh directional impetus to the pair.
From a technical perspective, the overnight breakout through a short-term trading range and a subsequent strength beyond the 155.00 mark could be seen as a fresh trigger for bullish traders. That said, the Relative Strength Index (RSI) on the daily chart remains in the overbought territory, warranting some caution amid intervention fears and ahead of the BoJ event risk. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for the next leg of a positive move. Nevertheless, the USD/JPY pair seems poised to prolong its recent well-established uptrend from the March swing low and aim to conquer the 156.00 round figure.
On the flip side, any meaningful corrective slide is likely to attract fresh buyers and remain limited near the 154.90-154.85 region. This is followed by the 154.55-154.45 support zone, which, if broken, might prompt some technical selling and drag the USD/JPY pair to the 154.00 round-figure mark. The downward trajectory could extend further towards last Friday's low, around the 153.60-153.55 area.
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: 0.1%
Previous: 0%
Source: Bank of Japan
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