USD JPY Struggles Below Mid-139.00s as US CPI Release Approaches
The USD/JPY pair is facing selling pressure in the Asian session on Tuesday, failing to sustain its recent gains. Currently trading just below mid-139.00s, the pair has declined by around 0.15% for the day but remains within a familiar trading range observed over the past two weeks. With the US Dollar (USD) hitting its lowest level since May 22 due to expectations of the Federal Reserve (Fed) delaying interest rate hikes, the USD/JPY pair is being dragged down. The Japanese Yen (JPY) is benefiting from safe-haven demand amid concerns of a global economic slowdown, further weighing on the pair.
However, the Bank of Japan’s (BoJ) dovish stance and the anticipation of the upcoming US Consumer Price Index (CPI) release may limit the downside for USD/JPY in the near term.
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USD JPY Struggles Below
The recent comments from several influential Fed officials have increased the likelihood of the Fed pausing its policy tightening cycle in June. Consequently, US Treasury bond yields have declined, putting downward pressure on the USD and impacting the USD/JPY pair negatively. Additionally, the Japanese authorities’ potential intervention to support their domestic currency, along with global economic slowdown concerns, has boosted the appeal of the safe-haven JPY. This combination of factors has contributed to the prevailing bearish sentiment surrounding the USD/JPY pair. However, the JPY’s upside could be limited due to expectations that the BoJ will maintain its accommodative monetary policy stance.
BoJ Deputy Governor Statement
Notably, BoJ Deputy Governor Masazumi Wakatabe stated on Monday that there are strong justifications for continuing with ultra-easy monetary policy measures. Conversely, market expectations imply the possibility of a 25 basis points interest rate hike at the July Federal Open Market Committee (FOMC) meeting. This outlook was influenced by surprise rate hikes by the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) last week, indicating that the battle against inflation is not yet over.
The focus now turns to the release of the latest US consumer inflation figures, scheduled for later during the early North American session. A stronger US CPI reading would support the prospects of further policy tightening by the Fed, potentially providing a modest lift to both the USD and the USD/JPY pair. However, the immediate reaction is likely to be restrained ahead of significant central bank events, including the FOMC decision on Wednesday and the BoJ meeting on Friday.
Conclusion:
The USD/JPY pair faces selling pressure as it remains below mid-139.00s, with the USD weakened by expectations of the Fed delaying interest rate hikes. Safe-haven demand for the JPY, driven by concerns about a global economic slowdown, further weighs on the pair. The BoJ’s dovish stance and upcoming events, such as the US CPI release, the FOMC decision, and the BoJ meeting, will influence the USD/JPY pair’s direction in the near term. Traders and investors will closely monitor these factors to gauge the potential impact on the currency pair.
