USDJPY retests its weekly bottom on Friday, but there is little follow-through selling.
The USDJPY pair hits a new weekly low during the Asian session on Friday. But recovers a few pips in the last hour to trade just below the mid-145.00s. Down less than 0.10% for the day.
The Fed-BoJ policy divergence continues to be a tailwind for the USDJPY pair.
The US Dollar (USD) revs up an intraday fall and attempts to build on the previous day’s excellent comeback. From the extremely crucial 200-day Simple Moving Average (SMA). Which is viewed as a major lending factor.The USDJPY pair has received some support. The USD bulls, on the other hand, are hesitant to initiate aggressive wagers in the face of uncertainties. About the Federal Reserve’s (Fed) potential rate rise path.
It is worth noting that earlier this week’s US macro statistics – the ADP report and the second estimate of the US Q2 GDP print – suggested. That the strong US economy may be losing speed. This encouraged expectations that the Fed might be obliged to ease up on its hawkish position. Nonetheless, Thursday’s US PCE Price Index leaves the door open for another 25 basis point increase before the end of the year.
Meanwhile, the likelihood of future Fed policy tightening leads to a minor rebound in the US Treasury bond market. And function as a tailwind for the US dollar.
Traders are now waiting for the US NFP report before making any directional bets.
Traders, on the other hand, are hesitant, preferring to wait for the publication of the closely-watched. US monthly job figures – popularly known as the NFP report – for some major push later in the early North American session.
Meanwhile, the Bank of Japan’s (BoJ) more dovish approach, along with dismal Japanese macro data and a constructive tone around US equities futures, may undercut the safe-haven Japanese Yen (JPY) and limit losses for the USDJPY pair. In fact, the Bank of Japan is the only central bank in the world with negative interest rates, and it is expected to keep its ultra-easy policy settings.
Furthermore, on Thursday, BoJ board member Toyoaki Nakamura stated that it was premature. tighten monetary policy, as recent inflationary hikes have been driven mostly by increasing import costs rather than wage gains. This comes on the heels of Bank of Japan Governor Kazuo Ueda’s dovish statements last week, in which he stated that underlying inflation remained slightly below the 2% goal, ensuring the status quo until next summer.
In terms of economic indicators, the latest Jibun Bank poll revealed. That Japan’s manufacturing sector continued to shrink in August. Indeed, the Manufacturing PMI was set at 49.6. Furthermore, Japan’s Finance Ministry revealed. That Capital Spending climbed by 4.5% year on year during the April-June period, down from 11.0% previously. And falling short of consensus projections of a 5.4% growth.
The aforementioned basic context implies that the path of least resistance should be taken. The trend for the USDJPY pair is upward. As a result, before confirming the construction of a near-term top around the 147.35-147.40 range. Or the highest level since November 2022 hit earlier this week, it will be smart to wait for substantial follow-through selling. Nonetheless, spot prices are on course to end a four-week winning streak.
