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Japanese Yen Seems Vulnerable; USD/JPY Bulls Await FOMC Minutes Before Placing Fresh Bets

Oct 09, 2024Finance0

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  • The Japanese Yen struggles to lure buyers amid uncertainty over future BoJ rate hikes.
  • Hopes for a possible Hezbollah-Israel ceasefire further undermine the safe-haven JPY.
  • Intervention fears cap USD/JPY amid subdued USD demand ahead of FOMC minutes.

    • The Japanese Yen (JPY) remains depressed against its American counterpart during the Asian session, with the USD/JPY pair eyeing this week’s swing high ahead of the release of the FOMC meeting minutes later this Wednesday. In the meantime, diminishing odds for more rate hikes by the Bank of Japan (BoJ) in 2024, especially after data released on Tuesday showed that Japan’s real wages fell in August after two months of gains, keeps the JPY bulls on the defensive. Furthermore, news of a possible Hezbollah-Israel ceasefire undermined demand for the safe-haven JPY and acts as a tailwind for the USD/JPY pair. That said, speculations that Japanese authorities might intervene to support the domestic currency might help limit losses for the JPY amid subdued US Dollar (USD) price action. Traders might also prefer to wait for this week’s release of the US Consumer Price Index (CPI) and the Producer Price Index (PPI) before placing directional bets. 

    Daily Digest Market Movers: Japanese Yen bears have the upper hand amid fading BoJ rate hike bets
     

  • According to the government data released on Tuesday, real wages in Japan – the world’s fourth-largest economy – fell 0.6% and household spending declined by 1.9%  in August from the same month a year earlier.
  • This, along with comments from Japan’s Prime Minister Shigeru Ishiba, saying that the country is not in an environment for more rate increases, could derail the Bank of Japan’s rate-hike plans in the coming months.
  • Israeli forces made new incursions in the south of Lebanon on Tuesday, raising the risk of a full-blown war in the Middle East, though the fears eased after Iran-backed Hezbollah left the door open for a negotiated ceasefire.
  • Japan’s Finance Minister Katsunobu Kato said earlier this week that the government would monitor how rapid currency moves could potentially impact the economy and would take action if necessary. 
  • The Reuters Tankan monthly poll showed on Wednesday that Japanese manufacturers turned more confident about business conditions in October and the sentiment index rose from 4 in September to 7 this month. 
  • The survey, however, indicated that Japanese manufacturers remained wary about the pace of China’s economic recovery and the service sector’s mood eased, reflecting patchy economic conditions in Japan.
  • The US Dollar extends its consolidative price move near a seven-week top amid diminishing odds for a more aggressive policy easing by the Federal Reserve and does little to influence the USD/JPY pair.
  • Traders now look forward to the release of September FOMC meeting minutes for some impetus, ahead of the US Consumer Price Index and the Producer Price Index on Thursday and Friday, respectively. 

    • Technical Outlook: USD/JPY seems poised to reclaim 149.00 and extend short-term ascending trend
     From a technical perspective, the emergence of some dip-buying on Tuesday comes on the back of last week’s move beyond the 50-day Simple Moving Average (SMA) for the first time since mid-July and favors bullish traders. Moreover, spot prices now seem to have found acceptance above the 148.00 mark, or the 38.2% Fibonacci retracement level of the July-September downfall. This, along with the fact that oscillators on the daily chart have been gaining positive traction, suggests that the path of least resistance for the USD/JPY pair is to the upside. Any further move up, however, might confront some resistance near the 148.70 zone ahead of the 149.00 round figure. Some follow-through buying beyond the weekly top, around the 149.10-149.15 region, will reaffirm the positive outlook and allow the pair to reclaim the 150.00 psychological mark.On the flip side, the overnight swing low, around the 147.35-147.30 region, now seems to protect the immediate downside ahead of the 147.00 mark. A convincing break below the latter could drag the USD/JPY pair to the 146.45 intermediate support en route to the 146.00-145.90 region and the 145.00 confluence support. The latter comprises the 50-day SMA and the 23.6% Fibo. level, which if broken decisively will suggest that the recent recovery from the vicinity of mid-139.00s, or a 14-month low has run its course and shift the near-term bias in favor of bearish traders.More By This Author:Australian Dollar Soft On Chinese Outlook, Dovish RBA Minutes GBP/JPY Climbs Back Into Positive Territory After Japanese Wage Data Misses Estimates GBP/USD Struggles To Capitalize On Modest Intraday Gains Beyond 1.3100 Mark

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