The Japanese yen trims some of its modest daily gains
What’s happening:-
The Japanese yen recorded gains against the US dollar for the third straight trading session on Tuesday.
What happened:-
The yen continued to gain today as well, with markets fully pricing in an interest rate hike by the Bank of Japan this year.Concerns around US President Donald Trump’s frequent shifts in trade policies also provided a boost to the safe-haven yen.
The Japanese yen recorded gains against the US dollar
Why it matters:-
The Bank of Japan issued a statement in a cautious tone last week, cutting its inflation and growth projections, which lowered speculations of an interest rate hike in June. However, the BoJ reiterated its commitment to continue increasing rates if the economy and inflation remain on track.
Meanwhile, the US Federal Reserve has kept its policy rate unchanged in the 4.25%-4.50% range since December. The US central bank is projected to hold rates at its upcoming meeting on Wednesday.
On the other hand, rapid shifts in the Trump administration’s policy stance kept investors on edge. In his latest move, the US President warned to impose 100% tariffs on movies produced overseas. The latest tariff threats have reignited growth concerns in the US despite signs of easing trade tensions with China.
The Trump administration said that it is in talks with certain countries, including China, with some trade deals expected to be announced this week.
Data released this morning showed the au Jibun Bank Japan services PMI was revised higher to 52.4 in April, from a preliminary reading of 52.2. The figure represents the sixth consecutive month of expansion and a significant improvement from March’s 50.0. The au Jibun Bank Japan Composite PMI rose to 51.2 in April, from a flash reading of 51.1 and March’s 48.9.
The JPY/USD climbed 0.47% to 143.11 this morning. Despite the gains, the forex pair is down 8.95% year to date.
A slight pullback in the US dollar is pulling the USD/JPY pair away from the multi-week high touched on Friday.
What to watch:-
Investors will continue monitoring tariff-related announcements from the US.
Minutes from the Bank of Japan’s monetary policy meeting, due to be released on Thursday, will also remain in focus.
USD/JPY shows resilience below 144.00; 143.75-143.70 hold the key for bullish traders
From a technical perspective, the USD/JPY pair struggled last week to find acceptance above the 50% Fibonacci retracement level of the March-April decline and faced rejection near the 200-period simple moving average (SMA) on the 4-hour chart. This makes it prudent to wait for some follow-through buying above the 146.00 level.Before positioning for an extension of the recent strong recovery from the multi-month low, spot prices may then rise to intermediate resistance at 146.55-146.60 before aiming to test the 61.8% Fibonacci level, around the 147.00 area.