Japanese Yen remains on the back foot against USD ahead of BoJ’s post-meeting presser

• The Japanese Yen struggles to gain any meaningful traction after the BoJ decision this Tuesday. 
• The Japanese central bank decided to leave its ultra-loose monetary policy settings unchanged.
• Traders, however, seem reluctant and look to BoJ Governor Ueda’s remarks for a fresh impetus.

The Japanese Yen (JPY) weakened a bit against its American counterpart after the Bank of Japan (BoJ) announced its decision on Tuesday, albeit lacked follow-through and held above its lowest level since November 28 touched last week. The central bank stuck to its ultra-loose monetary policy settings at the end of the January meeting, as was expected, and lowered its forecast for core inflation for the next fiscal year. Furthermore, there were no changes to forward guidance on monetary policy, which, along with the upbeat market mood, undermined the safe-haven JPY.

Traders, however, seem reluctant to place aggressive bets and look to BoJ Governor Kazuo Ueda’s remarks at the post-meeting press conference for cues about the interest rate outlook. This, in turn, will play a key role in influencing the JPY price dynamics in the near term. In the meantime, investors continue to pare their bets for an early interest rate cut by the Federal Reserve (Fed) in the wake of a still-resilient US economy. This remains supportive of elevated US Treasury bond yields, which act as a tailwind for the US Dollar and should lend support to the USD/JPY pair.

Daily Digest Market Movers: Japanese Yen seems vulnerable as BoJ expectedly retains its dovish stance

• The Japanese Yen edged lower after the Bank of Japan announced its decision to maintain the ultra-easy moneary policy settings at the end of the January policy meeting.
• The central bank, in the quarterly outlook report, noted that risks to economic activity is generally balanced and acknowledged the need to monitor whether virtuous cycle between wages and prices will intensify.
• In the accompanying monetary policy statement, the BoJ reiterated that it will continue with QQE with YCC as long as needed, and won’t hesitate to take additional easing steps if needed.
• Furthermore, the BoJ said that Japan’s economy is likely to continue recovering moderately and the likelihood of achieving sustained 2% inflation continues to gradually heighten.
• The US Dollar remains well supported by diminishing odds for an early rate cut by the Federal Reserve and the recent upbeat macro data, which suggested that the economy is in good shape.
• The current market pricing indicates a 40% chance of a March rate cut, down from as much as 80% a week ago, and a cumulative of five 25 bps rate cuts for 2024 as compared to six two weeks ago.
• The hawkish outlook allows the yield on the benchmark 10-year US government bond to hold steady at around 4.10%, just below the highest level since December touched last week.
• The conflict in the Middle East is showing no signs of easing, with the drone strikes by Iran-backed Houthi rebels continuing on commercial vessels in the Red Sea.
• Pakistan and Iran have decided to resolve their issues with diplomacy, while the Israel-Hamas conflict is threatening to erupt into a large-scale war and impact the global economy.
• Geopolitical tensions, along with persistent worries about slowing economic growth in China, could benefit the safe-haven JPY and cap any meaningful upside for the USD/JPY pair.

Technical Analysis: USD/JPY remains confined in a multi-day-old trading range, bullish bias remains

From a technical perspective, the range-bound price action witnessed over the past four days comes on the back of the recent breakout through the 100-day Simple Moving Average (SMA) and might still be categorized as a bullish consolidation phase. Moreover, oscillators on the daily chart are holding comfortably in the positive territory, suggesting that the path of least resistance for the USD/JPY pair is to the upside. That said, bulls might still wait for a move beyond a multi-week top, around the 148.80 region touched last week before placing fresh bets. Spot prices might then aim to surpass an intermediate hurdle near the 149.30-149.35 zone and reclaim the 150.00 psychological mark for the first time since November 17.

On the flip side, the 100-day SMA resistance breakpoint, currently around the 147.55 region, offered some support to the USD/JPY pair on Monday and might continue to protect the immediate downside. That said, a convincing break below the said area might prompt some technical selling and drag spot prices to the 147.00 round figure en route to the next relevant support near the 146.60-146.55 area. Any subsequent fall, however, might still be seen as a buying opportunity and is more likely to remain limited near the 146.10-146.00 horizontal support.