- USD/JPY turns lower for the second straight day on Thursday amid renewed USD selling.
- Diminishing odds for a larger Fed rate hike in September continue to weigh on the buck.
- The Fed-BoJ policy divergence and a positive risk tone could undermine the safe-haven JPY.
- A convincing break below the post-US CPI swing low is needed to confirm a fresh breakdown.
The USD/JPY pair retreats nearly 90 pips from the daily high and drops to a fresh daily low during the first half of the European session on Thursday. The pair is currently placed below mid-132.00s, still well above a one-and-half-week low touched the previous day.
The US dollar struggles to preserve its modest intraday recovery gains and meets with a fresh supply, which, in turn, is seen exerting some downward presure on the USD/JPY pair. Softer US inflation figures released on Wednesday forced investors to trim their bets for a more aggressive policy tightening by the Fed. Apart from this, a modest downtick in the US Treasury bond yields continues to weigh on the buck.
The Fed, however, is still expected to hike interest rates by at least 50 bps at the September policy meeting. In contrast, the Bank of Japan has repeatedly said that it will stick to its ultra-easy policy settings. The resultant Fed-BoJ monetary policy divergence, along with a generally positive tone around the equity markets, could undermine the safe-haven Japanese yen and offer support to the USD/JPY pair.
From a technical perspective, the overnight rejection slide from the 50-day SMA was seen as a fresh trigger. That said, it would be prudent to wait for a convincing break below the 132.00 mark, or the post-US CPI low before positioning for any further depreciating move. On the flip side, the daily swing high, around the 133.30 region, could now act as an immediate strong hurdle for the USD/JPY pair, at least for now.
Market participants now look forward to the US economic docket, featuring the release of the Producer Price Index (PPI) later during the early North American session. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities around the pair.
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 stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.