USD/JPY Navigates Bearish Waters Ahead of BoJ Decision Amid Rate Cut Speculations
Amid a cautious trading environment, the USD/JPY pair extends its downward trajectory for the third straight day, hovering around the 148.08 mark in Tuesday's early Asian session.
Amid a cautious trading environment, the USD/JPY pair extends its downward trajectory for the third straight day, hovering around the 148.08 mark in Tuesday’s early Asian session. Investors’ anticipation of the Bank of Japan’s (BoJ) forthcoming monetary policy meeting has injected a dose of uncertainty, exerting pressure on the pair.
The US Dollar’s recent consolidation, coupled with a decline in US Treasury yields, has been a key factor in the pair’s performance as market sentiment awaits pivotal economic events. Speculation around the Federal Reserve’s rate cut trajectory in 2024 has moderated, with expectations adjusting from 175 basis points (bps) to a more conservative 142 bps compared to the previous week.
The CME Fed Watch Tool reflects a cooling of aggressive rate cut bets, now suggesting a 42% probability of a cut in March, down from 70%. This recalibration offers a modicum of support for the US Dollar, potentially buoying the USD/JPY .
In Japan, all eyes are on the BoJ, which is poised to uphold its Yield Curve Control (YCC) and steady interest rates in the January assembly. The market’s focus will pivot to BoJ Governor Kazuo Ueda’s press conference, where insights on the trajectory toward policy normalization and an exit from negative rates are eagerly anticipated. December’s softening Core Consumer Price Index (CPI) in Japan has further dampened expectations for an imminent policy shift.
The impending BoJ interest rate verdict and subsequent press briefing are set to be the epicenter of volatility for the pair. With key US economic figures, such as Q4 Gross Domestic Product (GDP) and Core Personal Consumption Expenditures Price Index (Core PCE), slated for release later in the week, investors are bracing for potential shifts in the USD/JPY’s course.
USD/JPY Technical Outlook
From a technical standpoint, the USD/JPY pair’s recent test of the crucial 148.50 resistance level was met with a tepid response, as the price slid beneath this threshold, reinforcing the bearish outlook.
A decisive breach below 147.65 could pave the way for further declines, targeting 146.60 and 145.90 as subsequent bearish milestones. With Stochastic indicators reflecting waning bullish momentum, the path of least resistance appears downward, contingent on sustained trading below the 148.50 resistance zone.
Today’s anticipated trading range lies between 147.00 support and 148.50 resistance, with the prevailing trend leaning bearish.
USD/JPY Live Chart
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