- The Japanese Yen begins the new week with a softer tone amid the reduction of bets due to an increase in boxwood.
- The USD reverses part of the FRIDGE NFP drop and provides more support to the USD/JPY.
- The firm expectations of a Fed feat cut in September could limit the USD and the torque.
The Japanese Yen (JPY) attracts some vendors at the beginning of a new week and stops their strong recovery movement from a minimum of four months reached in front of its US counterpart on Friday. The Bank of Japan (BOJ) recognized uncertainty on the economic impact of US 15% targets on Japanese exports and pointed out a continuous patience in their policy last week. To this is added the internal political uncertainty that could further complicate the path of normalization of the Boj’s policy, which turns out to be a key factor that undermines JPY during the Asian session.
Meanwhile, the discouraging US Employment Report on Friday revived the economic concerns in the US and moderated the appetite of investors by riskier assets, which is evident in a weaker tone in the stock markets and could offer support to the safe refuge JPY. The US dollar (USD), on the other hand, could have difficulty gaining significant traction amid bets due to an imminent resumption of the Federal Reserve Rate (Fed) cycle in September. This could contribute to limiting any additional movement of appreciation for the USD/JPY torque and justifies caution for bullies.
Japanese Yen attracts new sellers in the midst of reducing probabilities of an immediate increase in rates by the Boj
- The US Labor Statistics Office (BLS) on Friday that the economy added 73K new jobs in July, compared to the 110K market expectation. In addition, the change in the total non -agricultural payroll for May was reviewed in 144k to 19K, and the change for June was reviewed from 147k to 14K.
- Other details of the report showed that the unemployment rate rose to 4.2% from 4.1% in June, as expected, while the average income per hour increased to 3.9% from 3.8%. The operators reacted rapidly and are now valuing more than 80% probability of a rate cut by the Federal Reserve at the September policy meeting.
- In addition, the CME Group Fedwatch tool now implies around 65 basic Fed relaxation points by the end of this year. To this is added that the Fed announced that Governor Adriana Kugler will resign in advance at his position on August 8, which caused a strong fall in the yields of the US Treasury bonds and weighed on the US dollar on Friday.
- The USD/JPY torque fell more than 350 pips from the neighborhood of the level of 151.00, or the highest level since the end of March, although it found some support near the round figure of 147.00 during the Asian session on Monday. The decreases in probabilities of an immediate increase in rates by the Bank of Japan limit the bullish potential of the Japanese yen.
- The BOJ reviewed its inflation prognosis at the end of July’s meeting last week and reiterated that it will continue to increase the policy rate if the economy and prices move in line with the forecast. However, the governor of the Boj, Kazuo Ueda, minimized the risks of inflation and showed no real intention to increase rates in the short term.
- Ueda added that the BOJ will analyze the data that comes out without any preconception and make an appropriate decision at each meeting. In addition, the loss of the Democratic Liberal Party in July suggests that the prospects for Boj rates increases could be delayed a little more, which is considered to weigh on the JPY.
- The operators now expect the publication of US factory orders to obtain some impetus later during the American session and before the minutes of the BOJ monetary policy meeting on Tuesday. Apart from this, the feeling of broader risk and USD price dynamics should contribute to generate short -term trading opportunities around the USD/JPY torque.
The USD/JPY finds some support about 147.00; The bullish potential seems limited
The break and closure of Friday below the level of fibonacci setback of 38.2% of the rebound from the minimum of July was seen as a key trigger for the bassists of the USD/JPY. However, the oscillators in the daily chart, although they have retired from higher levels, still remain in positive territory. This, in turn, helps the currency to find some support before the 50%recoil level, which is close to the 146,80-146.75 region and should act as a key point. A sustained rupture below the aforementioned support should pave the way for a fall to the level of 146.00 en route to the 145.85 zone, or the 61.8% fibonacci leveling level.
On the contrary, any subsequent recovery is more likely that in front of an immediate obstacle near the level of 148.00, above which the USD/JPY torque could rise to the horizontal barrier of 148.60. The subsequent movement could raise the prices in cash to the level of 149.00, or the retreat level of 23.6% of Fibonacci. A sustained strength beyond the latter will change the trend in favor of the upward operators and allow the currency pair to recover the psychological level of 150.00 with some intermediate resistance near the region of 149.50, or the very important simple mobile average (SMA) of 200 days.
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.
