- USD/JPY oscillates in a narrow trading band just below the YTD peak touched on Tuesday.
- A modest USD pullback from a two-month high and a softer risk tone cap gains for the pair.
- The Fed-BoJ policy divergence continues to act as a tailwind ahead of the FOMC minutes.
The USD/JPY pair extends its sideways consolidative price move for the second straight day and remains confined in a narrow band through the early North American session on Wednesday. The pair is currently placed just below mid-138.00s and remains well within the striking distance of the YTD peak touched the previous day.
The US Dollar (USD) pulls back following an early uptick to a fresh two-month high amid a further decline in the US Treasury bond yields. Apart from this, a generally weaker tone around the equity markets drives some haven flow towards the Japanese Yen (JPY) and acts as a headwind for the USD/JPY pair. Against the backdrop of worries about a global economic slowdown, the lack of progress in talks over increasing the US debt ceiling tempers investors' appetite for riskier assets and benefits traditional safe-haven assets.
The downside for the USD, meanwhile, seems cushioned amid firming expectations that the US central bank will keep interest rates higher for longer, bolstered by the recent hawkish comments by a slew of Federal Reserve (Fed) officials. In fact, the markets have been pricing in the possibility of another 25 bps lift-off in June. This marks a big divergence in comparison to a more dovish stance adopted by the Bank of Japan (BoJ), which continues to undermine the JPY and is seen lending some support to the USD/JPY pair.
Traders also seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the release of the FOMC meeting minutes, due later during the US session. The minutes will be closely scrutinized for clues about the Fed's future rate-hike path, which will play a key role in influencing the USD price dynamics and provide a fresh directional impetus to the USD/JPY pair. Nevertheless, the aforementioned fundamental backdrop favours bulls and suggests that the path of least resistance for spot prices is to the upside.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD finds fresh demand, nears 1.1100 ahead of US data
EUR/USD has found fresh demand and closes in on 1.1100 in the European session on Friday. The pair builds on the previous recovery amid extended US Dollar weakness and a cautiously optimistic market mood. Traders digest the less dovish ECB policy decision ahead of the US sentiment data.
GBP/USD consolidates gains near 1.3150 amid notable USD supply
GBP/USD is consolidating recovery gains while trading near 1.3150 in the European session on Friday. Despite a tepid risk tone, the pair capitalizes on increased bets for an outsized Fed rate cut, which continue to weigh on the US Dollar. US UoM Consumer Sentiment data awaited.
Gold gets lift as media revives debate over Fed rate cuts
Gold is exchanging hands in the high $2,560s on Friday, trading about 0.40% higher on the day after posting new record highs on Thursday when it broke decisively out of a range it had been oscillating in since it peaked on August 20.
Bitcoin and Ethereum traders could watch this signal for the next bull run
Crypto mining is the process by which new Bitcoin and Ethereum enter circulation. Data from crypto intelligence tracker shows that wallets of Bitcoin and Ethereum miners noted a decline in their holdings of the assets in the first half of the year.
European Central Bank widely expected to cut interest rates in September
The European Central Bank is expected to cut key rates by 25 bps at the September policy meeting. ECB President Christine Lagarde’s presser and updated economic forecasts will be closely scrutinized for fresh policy cues.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.