The Japanese Yen (JPY) drops to a fresh multi-decade low against its American counterpart heading into the European session on Tuesday, with bears now awaiting a move beyond the 155.00 psychological mark before placing fresh bets. Market participants seem convinced that the gap between interest rates in the US and Japan will remain wide for some time. Apart from this, the upbeat market mood, bolstered by easing geopolitical tensions in the Middle East, is seen undermining the safe-haven JPY.
The US Dollar (USD), on the other hand, attracts some buyers and recovers a part of the precious day's dismal US PMIs-inspired slide to over a one-week low, which, lends additional support to the USD/JPY pair. It, however, remains to be seen if the JPY bears can maintain their dominant position amid speculations that Japanese authorities will intervene in the markets to prop up the domestic currency and ahead of the crucial BoJ decision on Friday. Apart from this, the key US macro data – the Advance Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index – will provide a fresh directional impetus to the currency pair.
From a technical perspective, the range-bound price action witnessed over the past week or so could be categorized as a bullish consolidation phase against the backdrop of the recent blowout rally from the March swing low. However, the Relative Strength Index (RSI) on the daily chart is flashing overbought conditions and warrants some caution.
This, in turn, suggests that the USD/JPY pair is more likely to extend its consolidative price move or witness a modest pullback before the next leg up. That said, any meaningful corrective slide is likely to find decent support near the 154.55-154.45 region ahead of the 154.00 mark. The latter should act as a key pivotal point, which, if broken, could drag spot prices back towards last Friday's low, around the 153.60-153.55 area.
On the flip side, the multi-decade high, just ahead of the 155 psychological mark, might continue to offer some resistance to the USD/JPY pair. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and set the stage for an extension of a nearly two-month-old upward trajectory.
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: Fri Apr 26, 2024 03:00
Frequency: Irregular
Consensus: 0%
Previous: 0%
Source: Bank of Japan
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