■ The Japanese Yen draws some support from reviving bets for an eventual BoJ policy pivot.
■ The looming US government shutdown undermines the USD and seems to cap USD/JPY.
■ The Prelim US Q4 GDP could provide some impetus ahead of the PCE Price Index on Thursday.
The Japanese Yen (JPY) registered modest gains against its American counterpart on Tuesday and was underpinned by slightly stronger-than-expected domestic consumer inflation figures. In fact, Japan’s core CPI exceeded forecasts and revived bets that the Bank of Japan (BoJ) might end negative interest rates soon, which, in turn, provided a goodish lift to the JPY. The uptick, however, lacked bullish conviction amid expectations that a recession in Japan might force the BoJ to delay its plans to tighten monetary policy. This, in turn, assisted the USD/JPY pair to attract some dip-buyers near the 150.00 psychological mark and hold steady during the Asian session on Wednesday.
Meanwhile, the US Dollar (USD) continues with its struggle to gain any meaningful traction amid the looming US government shutdown and weaker US Durable Goods Orders. The downside, however, remains cushioned in the wake of expectations that the Federal Reserve (Fed) will wait until the June policy meeting before cutting interest rates in the wake of still sticky inflation and a resilient US economy. Traders might also prefer to wait for the release of the US Personal Consumption Expenditures (PCE) Price Index on Thursday for cues about the Fed's rate cut path. This, in turn, caps the upside for the USD/JPY pair and warrants some caution before positioning for any further gains.
Daily digest market movers: Japanese Yen bulls seem non-committed amid the BoJ policy uncertainty
The Japanese Yen struggles to capitalize on Tuesday's slightly warmer domestic consumer inflation-inspired gains amid the uncertainty over the Bank of Japan's policy outlook.
The latest CPI prints suggested that inflation is sticky even in Japan, fuelling speculations that the BoJ will eventually pivot away from its ultra-accommodative monetary policy settings.
Japan's economy unexpectedly slipped into recession during the fourth quarter and might force the central bank to delay its plan to end negative interest rates in the coming months.
US President Joe Biden emphasized the necessity of finding a solution to prevent a detrimental government shutdown on March 1 as a legislative logjam showed no signs of abating.
The US Census Bureau reported on Tuesday that Durable Goods Orders declined by 6.1% in January, the most in nearly four years and worse than a contraction of 4.5% anticipated.
The Conference Board's Consumer Sentiment Index fell to 106.7 in February despite a decline in inflation expectations for the next 12 months to the lowest level in almost four years.
The Federal Reserve Bank of Richmond's manufacturing index registered the fourth straight month of a negative reading, though improved to -5 in February from the -15 previous.
Apart from this, a modest downtick in the US Treasury bond yields keeps the US Dollar bulls on the defensive and is seen acting as a headwind for the USD/JPY pair on Wednesday.
Traders now look to the release of the Prelim US Q4 GDP print, which, along with speeches by influential FOMC members, will drive the USD demand and provide a fresh impetus.
The focus, however, will remain glued to the US Personal Consumption Expenditures (PCE) Price Index on Thursday, which could offer fresh cues about the Fed's rate-cut path.
Technical analysis: USD/JPY bulls not ready to give up yet, 150.00 psychological mark holds the key
From a technical perspective, the overnight swing low, around the 150.00 mark, might continue to act as immediate support ahead of the 149.70-149.65 region. A convincing break below the latter could drag the USD/JPY pair to the 149.35-149.30 area en route to the 149.00 mark and the 148.80-148.70 strong horizontal resistance breakpoint. Some follow-through selling will negate any near-term positive bias and pave the way for a further depreciating move.
On the flip side, bulls need to wait for a sustained strength beyond the multi-month top, around the 150.85-150.90 zone, before placing fresh bets. Given that oscillators on the daily chart are holding comfortably in the positive territory, the USD/JPY pair might then climb to the 151.45 intermediate hurdle before eventually climbing towards the 152.00 neighbourhood, or a multi-decade peak set in October 2022 and tested in November 2023.
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