Will US/JPY Break Below 140 Early in 2024?
USD/JPY was extremely bullish throughout last year, testing the record highs at 152 as the BOJ kept the dovish stance and the negative rates. But, it made a bearish reversal in November and has been on a has been on a negative trend since then, with sellers maintaining control, shorting this pair on every recovery, as the chart below shows.
Bank of Japan started this bearish reversal on this pair, after making some hawkish comments in November, hinting on a policy shift from negative rates and extending the band of its 10-year bond yields. But inflation has shown a slowdown in the last two months in Japan and they have since reversed course and are not planning any policy tightening in the near future, with the economy remaining weak. However, markets still fear intervention by Japanese authorities after such a strong rally last year.
Besides that, the FED has added further to the bearish momentum in this pair with the dovish shift and the mention of rate reduction next year. Now markets expect them to lower interest rates by almost 160 basis points this year, as the economic data continues to miss in the US as well.
Last week the Chicago Purchasing Managers’ Index (PMI) came below expectations of 51.0 points, falling deeper into contraction at 46.9 points in December compared to November’s 18-month peak of 55.8 points. Besides that, the unemployment claims for the previous week jumped higher to 218K from 206k previously. The softer US data numbers are supportive of broad-market risk appetite since it means that the FED will cut rates aggressively this year, with investors anticipating the global economy to worsen.
As a result, this pair continued to slip lower to 140.25 late last week, with the USD retreating, which contiues to perform badly against other major currencies as well. USD/JPY is presently at its lowest level since the end of July and may reach and breach the 140.00 level as sellers impose more control on this pair.
USD/JPY Live Chart
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