Japanese Yen retains negative bias against mildly positive USD; lacks bearish conviction
- The Japanese Yen kicks off the new week on a softer note amid reduced BoJ rate hike bets.
- The USD reverses a part of Friday’s post-NFP slump and further lends support to USD/JPY.
- Firming expectations for a September Fed rate cut might cap the USD and the currency pair.
The Japanese Yen (JPY) retains its negative bias against a broadly rebounding US Dollar (USD) and assists the USD/JPY pair to stick to modest gains near the daily peak, around the 147.75 region. The Bank of Japan’s (BoJ) dovish tilt last week, along with domestic political uncertainty, suggests that prospects for rate hikes could be delayed for a bit longer. This, in turn, is seen as a key factor behind the JPY’s relative underperformance at the start of a new week.
However, a generally weaker tone around the equity markets could offer some support and help limit losses for the safe-haven JPY. Furthermore, rising bets for an imminent interest rate cut by the Federal Reserve (Fed) in September might hold back the USD bulls from placing aggressive bets and contribute to capping the USD/JPY pair. This makes it prudent to wait for strong follow-through buying before positioning for any further appreciating move for the pair.
Japanese Yen remains on the back foot amid fading hopes for an immediate BoJ rate hike
- The US Bureau of Labor Statistics (BLS) reported on Friday that the economy added 73K new jobs in July, compared to the market expectation of 110K. Adding to this, the change in total Nonfarm Payroll employment for May was revised down 144K to 19K, and the change for June was revised down from 147K to 14K.
- Other details of the report showed that the Unemployment Rate edged higher to 4.2% from 4.1% in June, as expected, while the Average Hourly Earnings rose to 3.9% from 3.8%. Traders were quick to react and are now pricing in over an 80% probability of a rate cut by the Federal Reserve at the September policy meeting.
- Moreover, the CME Group’s FedWatch Tool now implies around 65 basis points of Fed easing by the end of this year. Adding to this, the Fed said that Governor Adriana Kugler is resigning early from her term on August 8, which triggered a steep decline in the US Treasury bond yields and weighed on the US Dollar on Friday.
- The USD/JPY pair tumbled over 350 pips from the vicinity of the 151.00 mark, or the highest level since late March, though it found some support near the 147.00 round figure during the Asian session on Monday. Diminishing odds for an immediate rate hike by the Bank of Japan cap the upside for the Japanese Yen.
- The BoJ revised its inflation forecast at the end of the July meeting last week and reiterated that it will continue to raise the policy rate if the economy and prices move in line with the forecast. BoJ Governor Kazuo Ueda, however, downplayed inflation risks and didn’t show any real intention to hike rates anytime soon.
- Ueda further added that the BoJ will look at the data to come out without any preconception and make an appropriate decision at each meeting. Moreover, the ruling Liberal Democratic Party’s loss in July suggests that prospects for BoJ rate hikes could be delayed for a bit longer, which is seen weighing on the JPY.
- Traders now look forward to the release of US Factory Orders for some impetus later during the North American session and ahead of the BoJ Monetary Policy Meeting Minutes on Tuesday. Apart from this, the broader risk sentiment and the USD price dynamics should contribute to producing short-term trading opportunities around the USD/JPY pair.
USD/JPY could accelerate the positive move once the 148.00 mark is cleared decisively
Friday’s breakdown and close below the 38.2% Fibonacci retracement level of the rally from the July swing low was seen as a key trigger for the USD/JPY bears. However, oscillators on the daily chart – though they have retreated from higher levels – are still holding in positive territory. This, in turn, assists the currency pair to find some support ahead of the 50% retracement level, which is pegged near the 146.80-146.75 region and should act as a pivotal point. A sustained break below the said support should pave the way for a fall towards the 146.00 mark en route to the 145.85 zone, or the 61.8% Fibo. retracement level.
On the flip side, any subsequent recovery is more likely to confront an immediate hurdle near the 148.00 mark, above which the USD/JPY pair could climb to the 148.60 horizontal barrier. The subsequent move up could lift spot prices to the 149.00 mark, or the 23.6% Fibo. retracement level. A sustained strength beyond the latter will shift the bias back in favor of bullish traders and allow the currency pair to reclaim the 150.00 psychological mark with some intermediate resistance near the 149.50 region, or the very important 200-day Simple Moving Average (SMA).
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.16% | 0.05% | 0.34% | -0.05% | -0.07% | -0.05% | 0.02% | |
| EUR | -0.16% | -0.06% | 0.19% | -0.20% | -0.37% | -0.22% | -0.15% | |
| GBP | -0.05% | 0.06% | 0.27% | -0.14% | -0.31% | -0.16% | -0.08% | |
| JPY | -0.34% | -0.19% | -0.27% | -0.38% | -0.56% | -0.40% | -0.15% | |
| CAD | 0.05% | 0.20% | 0.14% | 0.38% | -0.19% | -0.01% | 0.05% | |
| AUD | 0.07% | 0.37% | 0.31% | 0.56% | 0.19% | 0.15% | 0.22% | |
| NZD | 0.05% | 0.22% | 0.16% | 0.40% | 0.00% | -0.15% | 0.06% | |
| CHF | -0.02% | 0.15% | 0.08% | 0.15% | -0.05% | -0.22% | -0.06% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
