USDJPY bulls aren’t ready to give up yet.
A severe earthquake struck central Japan on Monday, ushering in a weaker start to the new year for the USDJPY. Aside from this, the bid tone around the USDJPY pair is expected to be supported throughout the early part of the European session by a slight strengthening of the US Dollar (USD). And a subsequent increase in the rates on US Treasury bonds. Having stated that, any additional gains for the main are restrained by the differing assumptions of the future policy action by the Federal Reserve and the Bank of Japan (BoJ).
Gambles on the BoJ’s decision to end the negative interest rate policy should serve to prevent more losses.
By the first half of 2024, market participants appear to be sure. That the Bank of Japan (BoJ) will end its ultra-loose policy and raise interest rates into positive territory. Given the pricing, there’s a good chance that this kind of action will take place in April. Following the yearly salary discussions in March. The Federal Reserve (Fed), on the other hand, is predicted to begin lowering interest rates as early as March 2024. Conversely, dovish Fed forecasts should limit US bond rates and the dollar. Which benefits JPY bulls and limits the USDJPY pair.
Additionally, geopolitical threats and issues concerning China’s shaky economic recovery support the bullish prediction for the safe-haven JPY. The FOMC minutes on Wednesday. And this week’s key US macro announcements, such as the eagerly anticipated monthly employment figures (NFP) report on Friday, appear to have discouraged traders from making directional bets. Therefore, it would be wise to hold off on confirming that the USDJPY pair has bottomed out. And positioning for future gains until there is significant follow-through purchasing.
Daily Market Movers: There is little follow-through and the USDJPY is still weak.
Tuesday sees the Japanese Yen end a three-day winning run against the US dollar in response to Monday’s 7.6-magnitude earthquake that caused a 1.2-meter wave.
wagers that the Bank of Japan (BoJ) will discontinue its extremely lax guidelines and Lifting interest rates into positive territory by the first half of 2024 ought to keep supporting the Japanese yen.
China’s economic problems and the geopolitical threats resulting from the war in the Middle East and Ukraine could help limit further losses for the safe haven. USD.
Following many attacks on various military and commercial vessels in the area, US forces retaliated against the Houthi militia, which is supported by Iran, in the Red Sea.
By the end of 2023, there appeared to be minimal indications of a revival in manufacturing activity, according to the official Chinese PMI that was issued over the weekend.
In the meantime, a private-sector poll released on Tuesday revealed. That while China’s factory activity increased more quickly in December. Business confidence remained restrained for 2024.
US Treasury bond yields fuels the US Dollar’s recovery.
A fresh increase in US Treasury bond yields fuels the US Dollar’s recovery from a five-month low, providing further support for the USDJPY pair.
The benchmark 10-year US government bond yield increased last week. Rebounding from its lowest point since July. Which is considered to be the base of the yield curve.
The current USD rebound from its lowest point since late July should be restrained. By pessimistic Federal Reserve views, which will also act as a drag on the USDJPY pair.
In anticipation of a soft landing for the economy. The markets have factored in the prospect that the Fed could lower interest rates six times this year, possibly as early as March.
Now, traders focus on the critical US macro data, like as Friday’s NFP report, is planned. At the start of each month to provide some significant momentum.
The FOMC meeting minutes, which are expected to be closely examined for clues. Regarding the timing of the first rate cut, will present investors with further challenges on Wednesday.
The US economic docket for this week also includes the JOLTS Job Openings and ISM Manufacturing PMI. Which are released on Wednesday and Thursday, respectively.
