BOJ Rate Hike Bets Soaring
USDJPY is on watch as we move through the back end of the week. The pair has broken down to fresh YTD lows today as hawkish BOJ expectations continue to drive JPY higher. The shift in the Yen on the back of the last BOJ rate-hike has largely been tied to expectations that the bank will continue to press ahead with further tightening, in line with its own signalling. Looking ahead, traders will be closely watching incoming Japanese inflation data overnight, expected to rise to 3.15% from 3% prior. If such a rise is confirmed, or exceeded, this will be firmly bullish for JPY as traders ramp up BOJ rate hike bets into the next meeting.
Safe-Haven Demand
JPY has also been bolstered this week by rising trade war tensions which have fuelled an uptick in safe-haven demand for gold and JPY. Volatile rhetoric from Trump and fresh tariff threats have ultimately kept USD pressured lower for now with investors choosing to store capital elsewhere. While this dynamic continues, JPY is expected to remain supported. The current USD weakness comes despite reduced near-term Fed easing expectations with the bank now expected to be on hold until well into the summer given fresh inflationary pressure.
FOMC Minutes Fail to Boost USD
Indeed, even last night’s hawkish FOMC minutes failed to boost the Dollar. Fed policymakers were seen agreeing that rates should remain on hold for time-being in light of fresh inflationary pressures and risks linked to Trump’s trade agenda. Market pricing is now currently centred around expecting the next Fed rate cut in July though this could well change if CPI remains elevated near-term.
Technical Views
USDJPY
The sell off in USDJPY this week has seen the market breaking below the 152 level with the pair now fast approaching a test of 149.30 as the downside channel break gathers pace. Momentum studies are bearish, keeping focus on further downside for now with 146.81 the deeper support level to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.