Japanese Yen Remains Dovish Before BoJ Speech Despite Weaker Domestic Figures and USD Recuperation
The Japanese Yen continues to dip after the Bank of Japan announced that it maintained interest rates levels and weaker than anticipated domestic economic data, which include weak machinery orders and unfavorable business sentiment. Although Japan’s trade balance showed improvement and wage growth prospects remain strong, investors remain cautious ahead of BoJ Governor Ueda’s speech for clues on future monetary policy moves. Meanwhile, a modest recovery in the US Dollar from a multi-month low has pushed USD/JPY above mid-149.00s, with technical indicators suggesting further upside potential. Yet, market players wait for significant cues from the BoJ as well as the next FOMC meeting before taking bold directional wagers. KEY LOOKOUTS • Market players wait for Ueda’s words for definite indications of future rate hikes and the central bank’s policy direction in the near future. • The 150.00 psychological level continues to be a crucial resistance; a consistent breakout would set off new bullish momentum towards 150.75–151.00 levels. • Deteriorating machinery orders and weakening business sentiment remain in focus for JPY, while trade balance has improved and wages have firmed up. • Attention turns towards the US Federal Reserve policy move, which could have a bearing on USD strength and overall USD/JPY direction. The Japanese Yen also remains on the weaker side as markets absorb the Bank of Japan’s move to leave interest rates unchanged and lower-than-anticipated domestic data such as disappointing machinery orders and falling business sentiment. Although a tighter trade balance and improving wage deals provide some respite to Japan’s economic prospects, investor sentiment continues to be risk-off ahead of BoJ Governor Ueda’s speech, where he is set to give a clue on when rate hikes can be expected. On the other hand, a slight rally in the US Dollar has driven USD/JPY past mid-149.00s, and technical readings are indicating possible additional upside if the pair successfully crosses the 150.00 resistance mark. All eyes now focus on the result of the FOMC meeting, which will potentially mold the path for USD/JPY. The Japanese Yen continues to be weak in the face of weak domestic data and the BoJ’s continued rate stance. Now, the markets are waiting for Governor Ueda’s speech and the FOMC result for more direction. A breach above the level of 150.00 may ignite fresh upside in USD/JPY. • The Japanese Yen stays low following the Bank of Japan maintaining its interest rate unchanged at its latest policy meeting. • Sluggish domestic data, such as declining machinery orders and declining business sentiment, weighed on the JPY. • Japan’s trade balance turned positive, driven by robust exports and lower imports. • USD/JPY pushed beyond mid-149.00s on the back of a modest rebound in the US Dollar from a multi-month low. • The resistance in the USD/JPY technicals stands at 150.00, and a clear breakout would encourage additional upside into the 150.75–151.00 zone. • Highly expected are comments from BoJ Governor Ueda for a pointer towards additional interest rate hike cycles and a monetary policy cue. • Markets eagerly await the outcome of the FOMC meeting, as this will drive the next decision in the USD/JPY. The Japanese Yen is still under pressure after the Bank of Japan left its short-term interest rate target unchanged. The action was taken as concerns over Japan’s economic prospects have been increasing, with recent figures indicating a fall in machinery orders and a decline in business sentiment among manufacturers. While the trade balance of the country improved as exports grew and imports decreased, these encouraging trends were dampened by general economic uncertainty. The central bank also admitted that economic growth and inflation risks are still high, making investors hesitant to anticipate the timing of any subsequent policy changes. USD/JPY Daily Price Chart Chart Source: TradingView In the meantime, focus turns to BoJ Governor Kazuo Ueda’s speech later this week, set to provide perspective on the direction of future bank policy. Other investors are paying close attention as well to what comes out of the two-day FOMC meeting in America, which would have implications on global financial markets and overall currency trends. In contrast to domestic woes, the news from Japan’s quarterly spring labor talks came as a welcome relief, with companies consenting to healthy wage increases for the third year in a row — something that could aid consumer consumption and push inflation higher in the months ahead incrementally. TECHNICAL ANALYSIS USD/JPY has evidenced renewed vigor after rebounding above the mid-149.00s, reflecting buying bias. The latest price action indicates that the buyers are taking over, particularly after a breakout above the important moving averages on the short-term charts. Nevertheless, the pair has a significant resistance level around the 150.00 psychological level, and a break above this level could lead to further upside. To the disadvantage, instant support exists in the proximity of 149.20–149.00, and breaking below that zone can reflect on the impending stall or change of trend to the current uptrend. Buyers and sellers are set to keep close watch at these levels in awaiting verification of the upcoming trend direction. FORECAST As long as the general market mood continues to lean toward the US Dollar and BoJ plays defensive, USD/JPY will quietly drift upward. A clean penetration above the all-important 150.00 psychological level would lay the groundwork for additional gains, with the possible target being in the 150.75–151.00 area in the short term. Upside momentum could be supported by solid US economic fundamentals and any hawkish undertones in the FOMC meeting. Additionally, positive wage growth in Japan could have inflationary ramifications, but with no policy changes indicated by the BoJ, the Yen would find it challenging to regain resilience. Alternatively, if BoJ Governor Ueda signals a tighter outlook or in case of any disappointing US economic data, USD/JPY may be on the downside. A breakout below the 149.00 level may mark a reversal of recent trend and send the currency back into correction. Additive weakness may see the pair decline towards the 148.20–148.00 region, and if mood turns sharply risk-averse,
