USDJPY encounters some supply and reverses a portion of the overnight strong advance up.
The USDJPY pair struggles to build on the previous day’s comeback of about 140 pips from the psychological level of 150.00, or more than a one-week low, and falls during the Asian session on Thursday. Spot prices are currently trading around 151.15, down almost 0.15% on the day, however any substantial decline appears elusive.
The US Dollar (USD) is expected to strengthen. The overnight recovery move from its lowest since September 1. Amid uncertainties over the Federal Reserve’s (Fed) future policy decision should operate as a tailwind for the USDJPY pair. The lower US CPI report issued on Tuesday revealed. That consumer inflation was falling quicker than expected, reinforcing predictions that the Fed will stop raising interest rates soon. Nonetheless, the rate of inflation remained significantly above the 2% objective. Raising confidence that the US central bank will maintain its aggressive approach.
Fears of intervention, combined with a cautious mentality, support the USDJPY and put pressure on the major.
In contrast, the Bank of Japan (BoJ) is the world’s only major central bank to retain negative interest rates. And has showed no signs of abandoning decades of exceptional easing measures. Furthermore, the disappointing domestic GDP figure announced on Wednesday, which showed that the economy contracted for the first time in three quarters, should allow the Bank of Japan to postpone any policy move away from its large monetary easing posture. This, in turn, may weaken the Japanese yen (JPY) and help to minimize losses for the USDJPY pair.
However, a little lower tone in US equity futures, as well as speculation that Japanese authorities may interfere in the FX market to counteract any protracted weakening of the native currency, could strengthen the safe-haven JPY. As a result, the USDJPY pair may continue to face headwinds. Meanwhile, the mixed fundamental background calls for some prudence before making bold directional wagers.
Traders are now looking to the US economic calendar, which includes data on Weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, and Industrial Production.
