- The Japanese yen is still undermined by the slight dovish inclination of the BOJ on Thursday.
- The reduction of bets due to a feat cut of the Fed in September acts as a tail wind for the USD and the USD/JPY torque.
- The operators now expect the publication of the Crucial NFP report from the USA to obtain a new impulse.
The Japanese Yen (JPY) touches a new minimum of four months in front of his American counterpart during Friday’s Asian session and seems vulnerable to weakening even more. The Bank of Japan (BOJ) reviewed its inflation forecasts on Thursday and offered a less bleak perspective on the economy, keeping the hopes of resuming rates of rates later this year. However, the governor of the Boj, Kazuo Ueda, adopted a dovish tone and pointed out patience in the normalization of politics, to observe the impact of tariffs after the commercial agreement between the USA and Japan. In addition, internal political uncertainty, which has fed concerns about Japan’s fiscal health, continues to undermine JPY.
Meanwhile, the feeling of global risk is affected after the US president Donald Trump signed an executive order by imposing higher tariffs of up to 41% to the main commercial partners worldwide. This offers some support to traditional assets of safe refuge and helps limit JPY losses. The US dollar (USD), on the other hand, is consolidating its strong weekly profits to its highest level from the end of May, backed by the Federal Reserve (Fed) that was slightly more Hawkish than expected, and helps limit the USD/JPY pair. The operators also seem reluctant and choose to wait for the publication of Non -Agricultural Payroll (NFP) of the USA before opening new directional positions.
Japanese Yen bears maintain control in the midst of diminished probabilities of an immediate increase in Boj rates
- The Bank of Japan, as expected, decided to maintain the status quo at the rates at the end of the July meeting on Thursday. At the press conference after the meeting, the governor of the Boj, Kazuo Ueda, minimized inflationary risks and showed no real intention to increase interest rates in the short term.
- Ueda pointed out that Japan’s economy is recovering moderately and that the commercial agreement between the US and Japan reduces uncertainty about economic perspectives. The BOJ will examine the data that comes out without any preconception and will make an appropriate decision at each meeting, added UDA.
- In addition, the BOJ reviewed its basic CPI prognosis to +2.7% for fiscal year 2025 compared to the previous +2.2%. The Central Bank reiterated that it will continue to increase the policy rate if the economy and prices move in line with the forecast, keeping the door open for an increase in rates at the end of this year.
- However, investors seem convinced that the prospects for BOJ fees increases could be delayed a little more after the loss of the Democratic Liberal Party in the July 20 elections. This, in turn, drags the Japanese Yen to a minimum of more than four months against a US dollar during the Asian session.
- The purchasing managers index (PMI) of Japan of Japan of S&P global was ended in 48.9 for July, slightly above the preliminary reading of 48.8. However, this suggests that Japan’s manufacturing activity re -entered into contraction territory after briefly stabilizing in June.
- The survey data, however, were collected before the announcement of the commercial agreement between Japan and the US last week, which reduced 15% tariffs from a previously threatened 25%. In addition, business confidence improved a maximum of six months in July, although this impresses the JPY bulls.
- The US dollar, on the other hand, rises to its highest level since the end of May in the middle of reducing bets for an interest rate cut in September by the Federal Reserve. In fact, the president of the Fed, Jerome Powell, said Wednesday that it was too early to say if the Central Bank would cut rates at its next meeting.
- Powell added that the current moderately restrictive monetary policy has not been braking the economy. The perspective was reaffirmed by the impression of the GDP of the ee.u.
- In addition, the US Economic Analysis Office reported Thursday that the Personal Consumption Expenses Price Index (PCE) rose to 2.6% in June from 2.4% revised on May. The basic indicator – excluding volatile food and energy prices – rose 2.8% compared to the estimated 2.7%.
- Other details of the report showed that personal income grew 0.3% in monthly terms in June, while personal spending increased 0.3%. This reaffirms the opinion that price pressures would increase in the second half of the year and delay the Fed fees cycle until at least October.
- Meanwhile, US President Donald Trump signed executive orders on Thursday, imposing tariffs on many US business partners who will enter into force in 7 days instead of the deadline of the initially established Friday. This occurs after the last round of commercial conversations between the US and China ended without agreement.
- Japan Economy Minister Ryosei Akazawa emphasized the importance of implementing the commercial agreement between the US and Japan and expects tariffs to impact the domestic economy. Akazawa expressed concern about currency trends, including speculative movements, although he refused to comment on current currency levels.
- The market approach now moves towards the publication of the monthly US employment data that follow closely. The non -agricultural payroll report is expected to show that the economy added 110,000 jobs in July and that the unemployment rate increased to 4.2% from the previous 4.1%.
- In addition to this, the US US economic agenda also includes the publication of the ISM manufacturing PMI. This, in turn, will play a key role in influencing the USD price dynamics and will generate short -term trading opportunities around the USD/JPY to the weekend.
The USD/JPY could pause near March, around 151.20, before the next rise
The Breakout sustained during the night through the very important simple mobile average (SMA) of 200 days and the subsequent strength beyond the psychological brand of 150.00 was seen as a new trigger for the USD/JPY bulls. However, the Daily Relative Force Index (RSI) is about to break into overcompra territory, which suggests that the price in cash could pause in the positive movement in the maximum of March, around the region of 151.20. However, the broader configuration supports the case for an extension of the recent well -established bullish trend.
Therefore, any corrective setback towards the round figure of 150.00 could be seen as a purchase opportunity. This, in turn, should help limit the fall of the USD/JPY torque near the region of 149.55 (200 -day SMA). The latter should act as a solid short -term base for cash prices, which, if it breaks decisively, could cause some technical sales and expose the following relevant support near the 149.00 brand.
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.
