Japanese Yen keeps the red against USD ahead of US Q4 GDP growth figures

The Japanese Yen (JPY) weakens a bit against its American counterpart on Thursday and retreats further from over a one-week high touched the previous day. the global risk sentiment gets an additional boost after the People's Bank of China (PBoC) announced more monetary stimulus measures on Wednesday. This, along with the recent widening of the US-Japan rate differential, undermines the safe-haven JPY and lifts the USD/JPY pair back closer to the 148.00 mark during the early part of the European session. 

The downside for the JPY, however, remains limited in the wake of the Bank of Japan's (BoJ) hawkish tilt, suggesting that conditions for phasing out stimulus and negative interest rates were falling into place. Apart from this, the risk of a further escalation of military action in the Middle East and the uncertain global economic outlook act as a tailwind for the safe-haven JPY. Furthermore, a subdued US Dollar (USD) price action holds back traders from placing aggressive bullish bets around the USD/JPY pair and caps gains. 

Investors also seem reluctant ahead of Thursday's important US macro releases – the Advance Q4 GDP print, Durable Goods Orders, Weekly Initial Jobless Claims and New Home Sales data. This will be followed by the Tokyo Core CPI report during the Asian session, though the focus remains glued to the US Personal Consumption Expenditures (PCE) Price Index. The crucial US inflation figures might influence the Fed's future policy decisions, which, in turn, will drive the USD and provide a fresh directional impetus to the USD/JPY pair. 

Daily Digest Market Movers: Japanese Yen remains depressed amid a positive risk tone, despite softer USD

• The Japanese Yen moves away from over a one-week high touched on Wednesday and is undermined by a combination of factors, though the Bank of Japan's hawkish tilt should act as a tailwind.
• The upbeat market sentiment gets an additional lift after the People's Bank of China announced a reduction in the Reserve Requirement Ratio by 50 bps starting from February 5 to boost the economy.
• The yield on the benchmark 10-year US government bond shot back closer to the monthly top in reaction to the upbeat US data, which lends support to the US Dollar and the USD/JPY pair.
• The S&P Global flash US Manufacturing PMI rebounded from 47.9 to a 15-month high of 50.3 in January, while the gauge for the services sector climbed to 52.9, or the highest reading since last June.
• Furthermore, the flash US Composite PMI Output Index increased to 52.3 this month, or the highest since last June, suggesting that the world's largest economy kicked off 2024 on a stronger note.
• This comes on top of the upbeat consumer spending and labor market data released last week, forcing investors to further scale back their expectations for an early interest rate cut by the Federal Reserve.
• BoJ Governor Kazuo Ueda laid the groundwork for monetary policy normalisation on Tuesday and said that the likelihood of sustainably achieving the 2% inflation target was gradually increasing.
• The head of Japan's biggest business lobby Keidanren called for wage hikes this year that exceed the inflation rate, paving the way for the BoJ to pivot away from its ultra-easy monetary policy settings.
• A mild verbal intervention by Japan's top currency diplomat Masato Kanda does little to impress the JPY bulls or provide any impetus, though might contribute to keeping a lid on the USD/JPY pair. 
• Kanda said that the government is carefully watching impact of central bank decision on financial markets and it is important for currency exchange rates to move stably reflecting economic fundamentals.
• Traders now look to the Advance US Q4 GDP report, which is expected to show that growth in the world's largest economy decelerated to a 2% annualized pace from 4.9% in the previous quarter.
• Thursday's US economic docket also features the release of Durable Goods Orders and the usual Weekly Initial Jobless Claims, which might provide some impetus to the buck and the USD/JPY pair.
• The market attention will then shift to the release of the Tokyo core CPI and the US Personal Consumption Expenditures Price Index data – the Fed's preferred inflation gauge – on Friday.

Technical Analysis: USD/JPY sits near daily peak, remains below 148.00 ahead of US GDP data

From a technical perspective, this week's repeated failures to find acceptance below the 100-day Simple Moving Average (SMA) and the subsequent rebounds suggest that the path of least resistance for the USD/JPY pair is to the upside. That said, any further move up is likely to confront some resistance near the 148.00 round figure ahead of the 148.20-148.25 region. The next relevant hurdle is pegged near the 148.80 region, or a multi-week high touched last Friday, which if cleared will be seen as a fresh trigger for bullish traders. Given that oscillators on the daily chart are holding comfortably in the positive territory, spot prices might then aim to surpass an intermediate hurdle near the 149.30-149.35 zone and reclaim the 150.00 psychological mark.

On the flip side, weakness below the 100-day SMA, currently around the 147.55 region, might continue to attract some buyers near the 147.00 mark. This should help limit the downside for the USD/JPY pair near the 146.45 zone, or the weekly trough touched the previous day. Some follow-through selling, however, will negate the positive bias and shift the near-term bias in favour of bearish traders, paving the way for a slide towards testing the 146.10-146.00 horizontal support. The downward trajectory could extend further towards the 145.30-145.25 intermediate support en route to the 145.00 psychological mark.