- USD/JPY gained some traction after the BoJ lowered its growth forecast for the current fiscal.
- Rebounding US bond yields underpinned the USD and remained supportive of the modest uptick.
- COVID-19 jitters continued lending some support to the safe-haven JPY and capped the upside.
The USD/JPY pair held on to its intraday gains through the early European session, with bulls awaiting a sustained move beyond the key 110.00 psychological mark.
The pair managed to regain some positive traction on the last trading day of the week and for now, seems to have snapped two consecutive days of the losing streak. The Japanese yen weakened a bit after the Bank of Japan lowered its growth forecast for the current fiscal year ending in March 2020 to 3.8% from 4.0% projected in April. This, in turn, was seen as a key factor that extended some support to the USD/JPY pair.
That said, the BoJ upgraded its forecast for the next fiscal year and expects the economy to expand 2.7% against 2.4% previous on expectations that consumption will pick up as vaccinations accelerate. Earlier the Japanese central bank decided to keep its benchmark policy rate steady at -10 basis points at the July monetary policy meeting and also maintained its pledge to buy J-REITS at an annual pace of up to JPY180 billion.
Bullish traders further took cues from a goodish pickup in the US Treasury bond yields, which underpinned the US dollar. Adding to this, expectations that the Fed will tighten its policy sooner than anticipated amid rising inflationary pressures further acted as a tailwind for the greenback. That said, COVID-19 jitters continued lending some support to the safe-haven JPY and capped gains for the USD/JPY pair.
Market participants now look forward to the US economic docket, highlighting the release of monthly Retail Sales figures later during the early North American session. This, along with the US bond yields, will influence the USD and provide some impetus to the USD/JPY pair. Apart from this, developments surrounding the coronavirus saga and the broader market risk sentiment might produce some trading opportunities.
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
Australian Dollar remains tepid after mixed Chinese data, Fedspeak awaited
The Australian Dollar extends its losses after mixed economic data from China on Friday. The Australian Dollar struggles as Australia’s 10-year bond yield has dropped to a monthly low of 4.2%. China’s Retail Sales increased for the consecutive 15th month but the softest gain in this sequence. The US Dollar has rebounded as the Fed remains cautious about inflation and potential rate cuts in 2024.
EUR/USD: Could FOMC Minutes provide fresh clues?
The EUR/USD pair advanced for a fourth consecutive week, comfortably trading around 1.0860 ahead of the close. Progress had been shallow, as the pair is up roughly 250 pips from the year low of 1.0600 posted mid-April.
Gold looks to extend uptrend once it confirms $2,400 as support
Gold price continued to push higher last week and rose above $2,400 on Friday, gaining nearly 2% for the week. Investors will continue to scrutinize comments from Fed officials this week and look for fresh hints on the timing of the policy pivot in the minutes of the April 30-May 1 meeting.
AI tokens could really ahead of Nvidia earnings
Native cryptocurrencies of several blockchain projects using Artificial Intelligence could register gains in the coming week as the market prepares for NVIDIA earnings report.
Week ahead: Flash PMIs, UK and Japan CPIs in focus. RBNZ to hold rates
After cool US CPI, attention shifts to UK and Japanese inflation. Flash PMIs will be watched too amid signs of a rebound in Europe. Fed to stay in the spotlight as plethora of speakers, minutes on tap.