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USD/JPY corrects further from YTD top, slides to 150.00 neighbourhood amid USD selling bias

  • USD/JPY remains under some selling pressure for the second successive day amid a weaker USD.
  • Expectations that the Fed is don raising rates and sliding US bond yields weigh on the Greenback.
  • The Fed-BoJ policy divergence should limit gains for the JPY and limit the downside for the major.

The USD/JPY pair extends the overnight retracement slide from the 151.70 area, or its highest level since October 2022 and drifts lower for the second successive day on Thursday. Spot prices currently trade just above the 150.00 psychological mark, down over 0.50% for the day, though any meaningful corrective decline still seems elusive.

Expectations that the Federal Reserve (Fed) is nearing the end of its policy-tightening campaign drag the US Dollar (USD) away from a near one-month peak touched on Wednesday, which, in turn, is seen exerting pressure on the USD/JPY pair. The US central bank left the key overnight interest rates unchanged for the second time in a row, though left the door open for additional rate hikes in the wake of the unexpected US economic resilience. However, Fed Chair Jerome Powell, in the post-meeting press conference, noted that the recent market-driven surge in borrowing costs could have its impact on economic activity.

Powell added that financial conditions may be tight enough already to control inflation, fueling speculations that the Fed was done raising rates and could start cutting rates by June next year. The repricing of the Fed's future rate-hike path leads to a further steep decline in the US Treasury bond yields and continues to weigh on the Greenback. Apart from this, 
speculations that Japanese authorities will intervene in the FX market to combat a sustained depreciation in the domestic currency also contribute to the offered tone surrounding the USD/JPY pair, though the Bank of Japan's (BoJ) dovish stance could help limit losses.

The BoJ's minor change to its yield curve control (YCC) policy pointed to a slow move towards ending years of massive stimulus. The Japanese central bank also indicated that a shift away from the ultra-dovish stance will take longer than initially expected. This marks a big divergence in comparison to a relatively hawkish Fed, which, along with the unattractiveness of Japanese government bonds, could undermine the Japanese Yen (JPY). Furthermore, a generally positive risk tone could dent the JPY's safe-haven demand and lend some support to the USD/JPY pair, warranting some caution for aggressive bearish traders.

Market participants now look to the US economic docket – featuring the release of the usual Weekly Initial Jobless Claims and Factory Orders data later during the early North American session. Apart from this, the US bond yields will influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader risk sentiment to grab short-term opportunities ahead of the closely-watched US monthly employment details – popularly known as the NFP report on Friday.

Technical levels to watch

USD/JPY

Overview
Today last price150.16
Today Daily Change-0.79
Today Daily Change %-0.52
Today daily open150.95
 
Trends
Daily SMA20149.71
Daily SMA50148.49
Daily SMA100145.58
Daily SMA200140.18
 
Levels
Previous Daily High151.71
Previous Daily Low150.66
Previous Weekly High150.78
Previous Weekly Low149.32
Previous Monthly High151.72
Previous Monthly Low147.32
Daily Fibonacci 38.2%151.06
Daily Fibonacci 61.8%151.31
Daily Pivot Point S1150.51
Daily Pivot Point S2150.06
Daily Pivot Point S3149.46
Daily Pivot Point R1151.55
Daily Pivot Point R2152.15
Daily Pivot Point R3152.59

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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