Japanese Yen extends the range play around 100-day SMA against USD, looks to FOMC meeting
|- The Japanese Yen fails to build on its modest intraday positive move against the USD.
- A positive risk tone undermines the JPY, albeit the BoJ's hawkish tilt to limit losses.
- Traders might wait on the sidelines ahead of the key FOMC decision on Wednesday.
The Japanese Yen (JPY) struggles to capitalize on a modest intraday uptick against the US Dollar (USD) and retreats to the lower end of its daily range during the first half of the European session on Tuesday. A positive tone around the European equity markets is seen as a key factor undermining the JPY's safe-haven status. The USD, on the other hand, regains positive traction amid some repositioning trade ahead of the highly-anticipated two-day FOMC monetary policy meeting starting today. This, in turn, assists the USD/JPY pair to rebound around 40 pips from the 147.15 area, or the daily trough.
That said, the risk of a further escalation of conflicts in the Middle East might keep a lid on the optimism, which, along with the Bank of Japan's (BoJ) hawkish tilt last week, should help limit losses for the JPY. Furthermore, the uncertainty over the timing of when the Federal Reserve (Fed) will start cutting interest rates might hold back the USD bulls from placing aggressive bets and cap the USD/JPY pair. Traders now look to the US economic docket – featuring the Conference Board's Consumer Confidence Index and JOLTS Job Openings data – for some impetus ahead of the key central bank event risk.
Daily Digest Market Movers: Japanese Yen bulls turn cautious ahead of Fed, despite geopolitical risks
- A positive risk tone undermines the safe-haven JPY, which, along with a modest US Dollar uptick, assists the the USD/JPY pair to attract some dip-buying near the 147.15 area on Tuesday.
- The USD bulls, however, might refrain from placing aggressive bets and prefer to wait for the outcome of a two-day FOMC meeting on Wednesday for cues about the timing of the first rate cut.
- Investors have been scaling back their expectations for a more aggressive policy easing by the Fed in 2024 in the wake of the upbeat US macro data and signs that the economy is still in good shape.
- The US Treasury lowered its forecast for federal borrowing to $760 billion from a prior estimate of $816 billion, dragging the US bond yields lower across the board and cap gains for the buck.
- Against the backdrop of the Bank of Japan's hawkish tilt, fears that a further escalation of conflicts in the Middle East could engulf the region in a wider war could benefit the safe-haven Japanese Yen.
- BoJ Governor Kazuo Ueda signaled last week that conditions for phasing out huge stimulus and pulling short-term interest rates out of negative territory were falling into place.
- Investors seem convinced that another substantial round of pay hikes by Japanese firms could fuel demand-driven inflation, which should allow the BoJ to pivot away from its ultra-loose monetary policy
- Japan’s Prime Minister Fumio Kishida told parliament on Tuesday that they will do "everything possible" to bolster household income and that the economy, particularly wage hikes, is an urgent issue..
- Reports suggest that President Joe Biden will authorize US military action in the Middle East in response to the drone attack by pro-Iranian militias near the Jordan-Syria border that killed three American soldiers. .
- Traders now look forward to the US economic docket, featuring the release of the Conference Board’s Consumer Confidence Index and JOLTS Job Openings data, for short-term opportunities.
- Investors this week will also confront the release of important US macroeconomic data scheduled at the beginning of a new month, including the Nonfarm Payrolls (NFP) on Friday.
Technical Analysis: USD/JPY traders seem non-committed near 100-day SMA pivotal point
From a technical perspective, the USD/JPY pair currently trades around the 100-day Simple Moving Average (SMA) pivotal point. With oscillators on the daily chart holding comfortably in the positive territory and still far from being in the overbought zone, any subsequent slide below the 147.00 mark is likely to find decent support near last week's swing low, around the 146.65 region. Some follow-through selling, however, will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.
On the flip side, the 147.65 area could act as an immediate hurdle ahead of the 148.00 round figure and the 148.30-148.35 zone. The next relevant hurdle is pegged near the monthly peak, around the 148.80 region. Bulls might wait for a sustained strength beyond the latter before placing fresh bets. The USD/JPY pair might then surpass the 149.00 mark and accelerate the positive move towards the 149.30-149.35 intermediate hurdle en route to the 150.00 psychological mark.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the British Pound (GBP).
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.00% | 0.04% | -0.02% | -0.03% | -0.09% | 0.00% | 0.03% | |
| EUR | 0.00% | 0.03% | -0.02% | -0.03% | -0.09% | 0.00% | 0.02% | |
| GBP | -0.03% | -0.03% | -0.06% | -0.06% | -0.13% | -0.02% | -0.01% | |
| CAD | 0.03% | 0.04% | 0.06% | 0.00% | -0.07% | 0.03% | 0.05% | |
| AUD | 0.04% | 0.04% | 0.07% | 0.00% | -0.07% | 0.02% | 0.05% | |
| JPY | 0.09% | 0.10% | 0.14% | 0.07% | 0.03% | 0.09% | 0.12% | |
| NZD | 0.00% | 0.00% | 0.03% | -0.03% | -0.03% | -0.10% | 0.02% | |
| CHF | -0.03% | -0.02% | 0.01% | -0.04% | -0.04% | -0.11% | -0.01% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Economic Indicator
United States Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
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