Japanese Yen sticks to positive bias on softer risk tone; BoJ’s dovish outlook might cap gains
- The Japanese yen attracts buyers for the second consecutive day in the middle of the plan request.
- A modest of the USD decrease dragging USD / JPY further from a several weeks old hit on Friday.
- Boj's Dovish break could win Jpy to win while the accent moves to the FOMC meeting this week.
The Japanese yen (JPY) remains on the front foot against a large, weaker US dollar (USD) for the second consecutive day and rekindles the USD / JPY pair closer to the 144.00 mark during the Asian session on Monday. Increased economic uncertainty following the erratic trade policies of the American president Donald Trump, to a larger extent, eclipses the signs of softening the American-Chinese trade tensions. Apart from this, geopolitical risks weigh on the feeling of investors and lead to safe flows towards the JPY.
Any significant appreciation of JPY seems however limited in the middle of the break of the Bank of Japan (BOJ) last Thursday. Traders could also refrain from placing aggressive boussières bets in USD before the Crucial Meeting of FOMC policy of two days from Tuesday. This could help limit the drawback for the USD / JPY pair, guaranteeing caution before confirming that the recent rebound from a hollow of several months has no vapor. In the meantime, the PMI of services in the United States ISM could ensure momentum on Monday.
The Japanese yen retains its positive bias in the middle of the package request, USD weaker
- China said that last week, it evaluated the possibility of commercial talks with the United States, fueling the hopes of potential de-escalation of tensions between the two largest economies in the world. US President Donald Trump announced a 100% price on all films produced abroad on Sunday.
- Israeli Prime Minister Benjamin Netanyahu promised to retaliate against the Houthi rebels aligned by Yemen Iran firing a missile that landed near Ben Gurion airport. In response, Iranian Defense Minister Aziz Nasirzadeh said Tehran would affect himself if the United States or Israel attacked.
- Russian President Vladimir Putin said in the remarks published on Sunday that Russia had enough strength and resources to take the war in Ukraine to his logical conclusion. This maintains the geopolitical risk in the game and leads to the sain-haven flows on Monday to the Japanese yen.
- Last Thursday, the Bank of Japan surprised the advice with Dovish and forced investors to support their bets for an increase in rates in June or July. However, the expansion of inflation in Japan and the prospects for sustained wage increases maintain the open door for a tightening of policies by the BOJ.
- The US dollar has trouble capitalizing on Friday's modest rebound which followed optimistic data from American jobs, which showed that the economy added 177,000 jobs in April against 130K expected. Other details of the report have shown that the unemployment rate has remained unchanged at 4.2.
- The data indicated an American labor market still resilient despite increased economic uncertainty on the back of prices and Trump concerns about the prices renewed pressures. Merchants postponed their expectations regarding the resumption of the rate of reduction of the rates of the federal reserve in July from June.
- However, this still marks a great divergence compared to the expectations of additional BOJ increases in 2025 and should act as a rear wind for the low -yield JPY. The objective of the market is now going to a two -day FOMC monetary policy meeting from Tuesday.
USD / JPY bear could now wait for the break below 143.75-143.70 before placing fresh bets
From a technical point of view, the USD / JPY pair had trouble finding acceptance above the Fibonacci trace level at 50% of the fall in March-April and faced a rejection near the simple moving average of 200 periods (SMA) on the 4-hour table. This makes prudish to wait for follow-ups beyond the 146.00 mark before positioning for an extension of the recent move of the Goodish recovery of a hollow of several months. The cash prices could then climb to the intermediate resistance of 146.55-146.60 before aiming to test the fibo of 61.8%. Level, around district 147.00.
Meanwhile, oscillators on the daily graph are still in positive territory, which suggests that any subsequent fall below the 144.00 mark could still be considered as a purchase opportunity. This should help limit the drawback near Swing Low on Friday, around the region of 143.75-143.70 which, so broken, could make the USD / JPY vulnerable pair. The following slide could lead to prices to the point towards the intermediate support of 143.30 on the round to the round figure of 143.00 and the 23.6% of Fibo., Around the region of 142.65.
FAQ of the Bank of Japan
The Bank of Japan (BOJ) is the Japanese central bank, which establishes a monetary policy in the country. Its mandate is to issue banknotes and carry out currencies and monetary control to guarantee price stability, which means an inflation objective of around 2%.
The Bank of Japan embarked on an ultra-launched monetary policy in 2013 to stimulate the economy and fuel inflation in the midst of a low inflation environment. Bank policy is based on quantitative and qualitative relief (QQE) or printing tickets to buy assets such as government or businesses to provide cash. In 2016, the bank doubled its strategy and has loosened the policy more by introducing negative interest rates, then by directly controlling the return on its state obligations to 10 years. In March 2024, the BOJ raised interest rates, effectively withdrawing from the position of ultra-Larçaise monetary policy.
The massive recovery of the bank has depreciated the yen against its main currency peers. This process was exacerbated in 2022 and 2023 due to a divergence from increasing policy between the Bank of Japan and other main central banks, which have chosen to increase interest rates to combat the levels of inflation of decades. Boj policy has led to an extended differential with other currencies, resulting in the value of the yen. This trend was partly infiltrated in 2024, when the Boj decided to abandon its ultra-launched political position.
A lower yen and the prices of world energy prices have resulted in an increase in Japanese inflation, which exceeded the target of 2% of the boj. The prospect of an increase in wages in the country – a key element fueling inflation – has also contributed to this decision.
