USDJPY reaches a new YTD high, but there is no sustained buying.
On Monday, the USDJPY pair begins a positive consolidation phase and trades in a constrained band beneath the 142.00 level. Which was reached during the Asian session and represents the highest level since November 2022. The Bank of Japan’s (BoJ) decision to abandon its ultra-loose policy settings. In order to bolster the frail domestic economy has continued to damage the Japanese Yen (JPY). In actuality, the Japanese central bank maintained its yield curve control strategy and its short-term interest rate goal at -0.1%.
The BoJ also maintained its prediction that inflation will moderate later this year. Indicating that it will continue to be a dove in a sea of doves. This is viewed as a significant element supporting the USDJPY pair on the opening day of a new week.
The USDJPY is supported by a generally milder risk tone, which restrains additional advances.
On the other hand, the US Dollar (USD) rises for a second day in a row. Despite the Federal Reserve’s (Fed) hawkish stance, looking to build on Friday’s modest recovery from almost a one-month low. It’s important to remember that the US central bank last week opted to stop raising interest rates on a yearly basis. But it also hinted that interest rates would still need to climb by as much as 50 basis points by the end of this year. As a result, the USDJPY pair receives more support. And the Greenback is helped to build some follow-through momentum. Though the increase lacks positive conviction.
How much headroom the Fed has to keep raising rates has been questioned. In light of recent weaker US macro data. Additionally, market participants appear confident that the Fed is nearly through tightening. Which prevents the USD bulls from making risky wagers. In addition, a generally more relaxed atmosphere in the equities markets helps to limit losses for the safe-haven JPY and further limits the upside for the USDJPY pair. At least for the time being. The fundamental environment, however, points to an upward trend for spot prices as the direction of least resistance.
Consequently, any significant corrective decline. It is more likely to stay cushioned and might still be considered a purchasing opportunity. The market will now be eagerly watching Fed Chair Jerome Powell’s two-day congressional testimony on Wednesday and Thursday for any new information regarding the direction of future rate hikes. In turn, this will have a significant impact on the dynamics of the USD price and give the USD/JPY pair some significant momentum. This week’s traders will also have to deal with the Friday release of the flash US PMI numbers.
