The Japanese Yen sees robust buying interest, pushing the USD/JPY pair to a four-week low around the 148.00 level during the early European trading session on Thursday. This surge is fueled by renewed expectations of rate hikes by the Bank of Japan (BoJ). The uncertainty surrounding the Federal Reserve’s rate-cut trajectory weighs on the US Dollar (USD), further contributing to the downward pressure on USD/JPY.
The recent rise in Tokyo’s Consumer Price Index (CPI) and hawkish comments from BoJ officials have bolstered speculation that the central bank may exit its negative interest rate policy sooner than anticipated, possibly as early as this month. This, coupled with a cautious sentiment in the equity markets, boosts demand for the safe-haven JPY, driving USD/JPY lower for the third consecutive day.
Meanwhile, the USD remains subdued near its lowest levels since February, as conflicting signals regarding the Fed’s stance on rate cuts fail to provide support for the greenback. This suggests that the path of least resistance for USD/JPY is downwards, with the potential for further depreciation in the near term.
Looking ahead, market participants await Fed Chair Powell’s second day of testimony, along with key economic data releases such as the US Weekly Initial Jobless Claims and Trade Balance figures. These factors, combined with the upcoming Nonfarm Payrolls (NFP) report on Friday, are likely to influence USD performance and provide direction for USD/JPY.
In addition to fundamental factors, technical analysis indicates a bearish bias for USD/JPY, with the potential for a break below the 148.00 level and the 100-day Simple Moving Average (SMA). Further downside movement could target support levels near the 147.00 and 146.80 regions. Conversely, resistance is seen near the 149.00 mark, with potential for further upside beyond the 150.00 level if bullish momentum strengthens.
