- The Japanese yen rises in front of the USD in the midst of the divergent policy expectations of the BOJ and the Fed.
- The persistent uncertainties related to trade and a positive risk tone limit JPY’s profits as a safe refuge.
- The operators expect the US NFP report before making new address bets around the USD/JPY.
The Japanese Yen (JPY) is quoted with a slight positive bias against a US dollar (USD) during the Asian session on Thursday and remains close to a peak of almost a month reached earlier this week. Despite doubts about the increase in rates of the Bank of Japan (BOJ), investors seem convinced that the Central Bank will remain on the path of standardization of monetary policy amid the growing inflation in Japan. This marks a significant divergence compared to the thrust of other important central banks (including the US Federal Reserve (Fed)) towards a more flexible approach and benefits the JPY of lower performance.
Meanwhile, the US president, Donald Trump, hinted at the possibility of ending commercial negotiations with Japan and also threatened more tariffs to Japan for his supposed lack of disposition to buy cultivated rice in the US in the US, along with a generally positive risk tone, it is considered an obstacle to the JPY as a safe refuge. In addition, the operators seem reluctant and choose to wait on the sidelines before the expected report of non -agricultural payroll (NFP) of the USA. Crucial data will play a key role in the influence of the US dollar (USD) and provide significant impulse to the USD/JPY torque.
Japanese Yen bullies have the advantage while betting for an increase in Boj rates compensate for commercial concerns
- The governor of the Bank of Japan, Kazuo Ueda, said Tuesday that the current policy rate was below the neutral and that additional increases in interest rates will depend on inflation dynamics. The inflation of consumers in Japan has exceeded the goal of 2% of the BOJ for more than three years, since companies continue to transfer the growing costs of raw materials. This supports the need for greater hardening by the Central Bank and acts as a tail wind for the Japanese yen.
- In contrast, the president of the Federal Reserve, Jerome Powell, when asked if Julio was too early to consider rates cuts on Tuesday, he replied that he will depend on the data. The operators increased their bets and are now valuing almost 25% probability of a rate cut by the Fed at the July 29-30 meeting. In addition, a 25 basic points cut in September is almost certain, and the expectations of two rate cuts by the end of this year are high.
- Meanwhile, US president Donald Trump intensified his attacks against Powell and asked that the Fed chief give up immediately. This further increases concerns about the independence of the Central Bank and keeps the US dollar bundles on the defensive. The disappointing publication of the US ADP report also weighs on Wednesday, which showed that private payrolls unexpectedly lost 33,000 jobs in June.
- In addition, the reading of the previous month was reviewed down to show an addition of 29,000 jobs compared to the 37,000 initially reported. The data suggested a slow hiring environment and fed speculations that the US unemployment rate could increase at least 4.3% in June from 4.2% in May. Therefore, the market approach will remain focused on the expected report of Non -Agricultural Payroll (NFP) of the US that will be published later this Thursday.
- In the front -related front, Trump expressed frustration for the stagnant trade negotiations between the US and Japan and questioned the possibility of reaching an agreement before the deadline of July 9. In addition, Trump suggested that he could impose a 30% or 35% tariff on Japan imports, above the 24% tariff rate announced on April 2, in retaliation due to the alleged lack of disposal from Japan to buy grown rice in the US.
The USD/JPY seems vulnerable while below the 200 SMA in H4, around the 144.30 region
From a technical perspective, the night rejection near the simple mobile average (SMA) of 200 periods in the 4 -hour graph and the negative oscillators suggest that the lower resistance path for the USD/JPy torque is down. Some follow-up sales below the 143.40-143.35 area would reaffirm the bassist perspective and drag cash prices closer to the round figure of 143.00. This is followed by the weekly minimum, around the region of 142.70-142.65, which, if it breaks, should pave the way for a fall to the monthly minimum of May, around the region of 142.15-142.10.
On the contrary, any positive return movement above the 144.00 mark could continue to face a strong resistance near the SMA of 200 periods in the 4 -hour graph, currently located near the region of 144.30. However, a sustained strength above the latter could trigger a short coverage movement and raise the USD/JPY torque beyond the horizontal zone of 144.65, towards the psychological brand of 145.00. The impulse could extend even more towards the supply zone of 145.40-145.45, which, if it is clear decisively, could change the short-term bias in favor of the bulls.
Japanese – frequent questions
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
