USDJPY oscillates in a narrow trading band, influenced by a number of diverging forces

On Thursday, the USDJPY pair struggles to find a firm intraday direction, swinging between tepid gains and minor losses throughout the first half of the European session. The pair is currently trading just above the 133.00 mark. Almost unchanged for the day, and is influenced by a number of factors.

Concerns about a deeper global economic downturn drive some haven flows to the Japanese Yen (JPY). Which, combined with the dominant US Dollar (USD) selling bias, acts as a headwind for the USDJPY pair. It is worth noting that the International Monetary Fund (IMF) cut its global growth forecast for 2023 on Tuesday, citing the impact of higher interest rates. Furthermore, today’s mixed Chinese trade data adds to concerns about the post-COVID recovery. The world’s second-largest economy is slowing.

Bets on the Fed slowing its rate-hiking cycle weigh on the USD and act as a headwind.

Furthermore, growing acceptance that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle causes US Treasury bond yields to fall further. Another factor that benefits the JPY is the consequent narrowing of the US-Japan rate differential. Investors appear to be convinced that the Fed will pause its monetary tightening after one more hike next month. And the softer US CPI report on Wednesday reaffirmed their bets. As a result, the USD falls to its lowest level since early February, contributing to the USDJPY pair’s cap.

The BoJ’s more dovish outlook caps USDJPY gains and limits any meaningful decline in the major.

However, the Bank of Japan’s (BoJ) dovish near-term outlook limits the JPY’s gains and acts as a brake. as a tailwind for the USDJPY pair.

As a result, bearish traders may be hesitant to place aggressive bets, and it is prudent to exercise caution before concluding that the one-week-old uptrend has run its course. Market participants are now looking forward to the US economic calendar, which will include the release of the Producer Price Index (PPI) and the usual Initial Weekly Jobless Claims, for short-term trading opportunities later in the North American session.

USDJPY Daily Trends