- USD/JPY gains some traction on Wednesday and hits a fresh 24-year high.
- The divergence between the monetary policy of the Fed and the BoJ and the disappointing national data weigh on the yen and extend the support for the pair.
- Bulls are cautious on intervention fears and ahead of the FOMC meeting minutes.
The pair USD/JPY is based on the upward trend of the last week and hits a new 24-year high on Wednesday. The pair maintains its buying tone during the first half of the European session and remains comfortably above the 146.00 level.
The Japanese yen takes a further hit after the release of domestic data, which shows that machinery orders fell more than expected in August. This, along with a large divergence in the monetary policy stance adopted by the Bank of Japan and other central banks important, continues to boost the USD/JPY pair for the sixth day in a row.
In fact, the Bank of Japan has so far shown no intention of raising interest rates and is lagging behind in the process of normalizing monetary policy. In addition, Japan’s Prime Minister Fumio Kishida stated on Tuesday that the BoJ must maintain its ultra-loose policy until wages rise. On the contrary, the Fed is expected to maintain its faster rate hike cycle to combat persistent inflation.
Recent hawkish comments from several Fed officials, coupled with Friday’s strong US employment report, Expectations rose for another 75 basis point rate hike by the US central bank. in November. This remains supportive of elevated US Treasury yields, widening the US-Japan rate spread and supporting prospects for an extension of the pair’s well-established uptrend.
Nevertheless, speculation about further intervention in the foreign exchange market by the Japanese authorities are preventing traders from opening new bullish positions on the USD/JPY pair. Japan’s Finance Minister Shunichi Suzuki reiterated earlier this week that the government is willing to step in and respond appropriately to excessive currency movements. This, in turn, is limiting the pair’s upside.
Traders also appear reluctant, preferring to sit on the sidelines ahead of the FOMC meeting minutes, due to be released on Wednesday during the US session. The minutes will be closely watched for clues on the Fed’s rate hike path, which will play a key role in influencing dollar dynamics and provide some momentum to the USD/JPY pair ahead of the report. Thursday’s US CPI.
USD/JPY technical levels
Source: Fx Street
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