USD/JPY Flat-lined Above Mid-151.000's But Remains Confined In A Familiar Territory, A Slew of Key U.S. Macro data Awaited
Key Takeaways:
- The Japanese Yen flat-lined on Wednesday during the Asian session
- Despite earlier speculations of intervention by the BoJ, expectations that the central bank will not hike rates again this year weigh on the major currency
- Uncertainty about the timing of the Fed rate cuts continues to weigh on the greenback
- Markets look forward to a slew of key U.S. macro data for fresh USD/JPY directional impetus
The Japanese Yen was nearly flat-lined above the mid-151.000s on Wednesday during the Asian session and remained confined in a familiar range held over the past two weeks.
Speculations of BoJ intervention to prevent further yen freefall continue to support the Yen. Earlier this week, Japanese Finance Minister Shunichi Suzuki repeated his warning that authorities were ready to take appropriate action against excessive exchange-rate volatility and offered some support to the Japanese Yen.
However, expectations that the BoJ will not hike again this year, despite hiking rates for the first time in 17 years during the March meeting, fail to offer meaningful support to the Yen. The bets were reaffirmed after the Minutes of the Bank of Japan Monetary Policy Meeting on January 22 and 23, which showed that the Bank pledged to continue its quantitative and qualitative monetary easing (QQE) with yield curve control this year.
In contrast, the Fed is expected to leave rates unchanged during the May meeting and start cutting rates during the third quarter of 2024, which remains supportive of the greenback and suggests the path of least resistance for the USD/JPY pair is to the upside.
However, uncertainty about the timing of the rate cuts and rising geopolitical risks tempers investors' appetite for risk-perceived assets and further benefits the Japanese Yen (JPY).
That said, markets still feel convinced that the Fed will start cutting rates as soon as the June meeting, despite a series of hot back-to-back U.S. consumer and wholesale inflation reports, stronger job reports, and a series of hawkish remarks by top Fed officials. The bets were raised following Friday's better-than-expected U.S. Core (PCE) data, the Fed's preferred inflation gauge, which offered no surprises and held to the long-term view that the Fed will cut rates in 2024.
Elsewhere, the number of job openings increased by 8,000 from the previous month to 8.756 million in February 2024, above market expectations of 8.75 million, a U.S. Bureau of Labor Statistics report showed on Tuesday.
As we advance, investors look forward to the U.S. docket, which will feature the release of the ADP Nonfarm Employment Change (Mar), Services PMI (Mar), and ISM Non-Manufacturing PMI (Mar) data reports. Investors will look for cues from Fed Chair Powell's speech during the mid-North American session.
Technical Outlook: One-Day USD/JPY Price Chart
Looking at the broader picture, the USD/JPY pair has been trading within a familiar range over the last two weeks or so. The 151.846 - 150.873 region has supported spot prices and should now act as pivotal points. Meanwhile, the technical oscillators on the daily chart (RSI14 & MACD) are holding in positive territory and support prospects for an eventual break above the upper limit of the range. It is, however, prudent to wait for sustained strength above the trading range resistance before positioning for further appreciating moves.
On the flip side, the lower limit of the range (150.873 level) offers direct support for spot prices. A convincing move below this level will pave the way for a drop to tag the 20-day (blue) EMA level at 150.658, below which the pair could accelerate the fall toward the 150.269 support level. On further weakness, the USD/JPY pair could decline toward the 150.000 psychological mark, upon which, if this level fails to hold, the major currency pair could extend a leg down toward the 149.721 level en route to the 149.185 - 148.817 demand zone.
