Japanese Yen bears retain control near multi-decade low, 155.00 eyed ahead of BoJ on Friday

The Japanese Yen (JPY) remains on the defensive against its American counterpart and hangs near a multi-decade low heading into the European session on Monday. The uncertainty over the Bank of Japan's (BoJ) further policy tightening, along with easing fears about a further escalation of geopolitical tensions in the Middle East, turn out to be key factors that continue to undermine the safe-haven JPY. Apart from this, the recent US Dollar (USD) bullish run to the highest level since early November, bolstered by expectations that the Federal Reserve (Fed) will keep interest rates higher for longer, is seen acting as a tailwind for the USD/JPY pair.  

Meanwhile, the BoJ Governor Kazuo Ueda's hawkish rhetoric last week and fresh warnings by Japanese Finance Minister Shunichi Suzuki against excessive currency market moves help limit deeper JPY losses. Traders also seem reluctant to place aggressive directional bets around the USD/JPY pair ahead of the crucial BoJ policy decision on Friday. Investors this week will also confront important US macro releases – the Advance Q1 GDP print and the Personal Consumption Expenditures (PCE) Price Index on Thursday and Friday, respectively. This should provide a fresh impetus and determine the near-term trajectory for the currency pair. 

Daily Digest Market Movers: Japanese Yen remains on the back foot amid divergent BoJ-Fed expectations

• Data released on Friday showed that Japan’s consumer inflation eased more than expected in March, raising uncertainty about whether the Bank of Japan will raise rates again and weighing on the Japanese Yen.
• Iran signaled that it has no plans to retaliate against the Israeli limited-scale missiles strike on Friday, which helps improve investors' appetite for riskier assets and further dents the JPY’s relative safe-haven status.
• BoJ Governor Kazuo Ueda said on Friday that the central bank might consider raising interest rates again if significant declines in the Yen substantially boost inflation, lending support to the domestic currency. 
• Japan's Finance Minister Shunichi Suzuki issued fresh warnings to speculators about pushing down the JPY too much and reiterated that he would take appropriate action against excessive currency market moves.
• According to Fed funds futures, the Federal Reserve is now anticipated to cut interest rates by roughly 40 basis points (bps), or less than two cuts this year starting September in the wake of sticky US inflation. 
• This suggests that the large rate differential between the US and Japan will stay, which should act as a headwind for the JPY and lend support to the USD/JPY pair ahead of the crucial BoJ monetary policy decision. 
• Markets predict no policy change following last month’s historic decision to end the negative rate policy and Yield Curve Control (YCC) program, suggesting that the focus will remain on the quarterly outlook report.
• From the US, the Advance Q1 GDP print and the Personal Consumption Expenditures (PCE) Price Index are due for release on Thursday and Friday, respectively, which should influence the US Dollar price dynamics. 

Technical Analysis: USD/JPY consolidates before the next leg up, 155.00 mark holds the key for bullish traders

From a technical perspective, the range-bound price action witnessed over the past week or so might still be categorized as a bullish consolidation phase against the backdrop of the recent rally from the March low. That said, oscillators on the daily chart are flashing overbought conditions and capping the upside for the USD/JPY pair. Nevertheless, the setup suggests that the path of least resistance for spot prices is to the upside, and any meaningful corrective pullback might still be seen as a buying opportunity near the 154.30 area. This should help limit the downside near the 154.00 mark, which, if broken, might expose Friday's swing low, around the 153.60-153.55 region. Some follow-through selling has the potential to drag the pair further towards the 153.30-153.25 intermediate support en route to the 153.00 round figure. 

On the flip side, the multi-decade high, around the 154.75-154.80 region touched last week, could act as an immediate hurdle ahead of the 155.00 psychological mark. A sustained strength beyond the latter will confirm a fresh breakout through the short-term trading range and set the stage for an extension of a well-established appreciating trend.