- USD/JPY is moving lower for the fourth day in a row amid modest USD weakness.
- Geopolitical tensions benefit the safe-haven JPY and add to the selling bias.
- The monetary policy divergence between the Fed and the BoJ should limit further losses for the pair.
The pair USD/JPY moves lower at the start of the European session on Wednesday and falls near the low of the previous day, around the region of 114.60.
After an initial rally to the 114.80 area, USD/JPY found fresh selling and moved into negative territory for the fourth day in a row on Wednesday. The bears could now be looking to extend the recent sharp pullback from the 115.70 region touched last week amid the selling bias around the US dollar.
Fed officials downplayed the possibility of a 50 basis point interest rate hike in March., which in turn weighed on the dollar. Indeed, St. Louis Fed President James Bullard said he was not in favor of a more aggressive policy response. On the other hand, Philadelphia Fed President Patrick Harker said he is a little less convinced about a 50 basis point interest rate hike.
On the other hand, the conflict between Russia and the West over Ukraine continued to lend some support to the safe-haven Japanese yen. This was seen as another factor putting some pressure on the USD/JPY pair, although the divergence in monetary policy outlooks between the Fed and the Bank of Japan should help limit any further losses.
Markets have fully priced in a first rate hike from the Fed in March and expect five hikes of 0.25% by the end of 2022. By contrast, the Bank of Japan has repeatedly asserted itself to continue its persistent and powerful monetary easing until further notice. warning. This, in turn, warrants some caution for aggressive bears.
Investors are now awaiting the release of ADP’s US private sector employment report for some momentum at the start of the American session. The data could influence USD price dynamics, although the market focus will remain on the release of Friday’s NFP Non-Farm Payrolls report.
USD/JPY technical levels
Source: Fx Street
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