The Japanese Yen (JPY) extends its steady intraday descent through the early European session on Tuesday, lifting the USD/JPY pair to a fresh two-week high, around the 149.85 region in the last hour. The global risk sentiment remains well supported by the optimism over China's stimulus measures and hopes for a Ukraine peak deal, which, in turn, is seen undermining the safe-haven JPY. Apart from this, a modest US Dollar (USD) recovery from a multi-month low touched on Monday lends additional support to the currency pair.
Meanwhile, the markets have been pricing in the possibility that the Bank of Japan (BoJ) will continue raising interest rates this year. The bets were reaffirmed by positive results from Shunto spring wage negotiations, which, along with worries about the potential economic fallout from US President Donald Trump's trade tariffs, could limit deeper JPY losses. Furthermore, bets for further policy easing by the Federal Reserve (Fed) should cap the USD and the USD/JPY pair ahead of the highly-anticipated BoJ and the Fed policy decisions on Wednesday.
From a technical perspective, the overnight breakout above the 100-period Simple Moving Average (SMA) on the 4-hour chart and subsequent strength above the 149.00 mark could be seen as a key trigger for bulls. Moreover, oscillators on the said chart have been gaining positive traction and support prospects for additional gains. Hence, some follow-through strength, back towards reclaiming the 150.00 psychological mark, looks like a distinct possibility. Any further move up, however, is more likely to confront stiff resistance and remain capped near the 150.75-150.80 region, representing the 200-period SMA on the 4-hour chart.
On the flip side, the 149.20 area, followed by the 149.00 mark and the 148.80 region (200-period SMA on the 4-hour chart) now seem to protect the immediate downside. A convincing break below the said support levels will suggest that the recent move-up witnessed over the past week or so has run out of steam and drag the USD/JPY pair to the 148.25-148.20 support en route to the 148.00 mark. The downward trajectory could extend further towards the 147.70 area, 147.20 region, and the 147.00 mark before spot prices eventually drop to retest a multi-month low, around the 146.55-146.50 region touched on March 11.
The Bank of Japan (BoJ) announces its interest rate decision after each of the Bank’s eight scheduled annual meetings. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and raises interest rates it is bullish for the Japanese Yen (JPY). Likewise, if the BoJ has a dovish view on the Japanese economy and keeps interest rates unchanged, or cuts them, it is usually bearish for JPY.
Read more.Next release: Wed Mar 19, 2025 03:00
Frequency: Irregular
Consensus: 0.5%
Previous: 0.5%
Source: Bank of Japan
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