Weak USD Sentiment
USDJPY continues to slide lower on Tuesday with the market currently on course to print its sixth consecutive losing day. The shift in sentiment following a breakout move last week has been swift and reflects the weakening we’ve seen in USD amidst the loss of optimism over US/China trade as well as softer US data. No subsequent headlines relating to US/China negotiations means the initial pro-risk move has dissipated with safe-haven flow moving back into JPY accordingly. The recent downside surprise in US inflation has also kept USD anchored lower with near-term Fed easing expectations starting to rise again.
Hawkish BOJ Expectations
On the JPY front, the currency is also being boosted by hawkish BOJ expectations. The bank recently noted that it will remain agile in its policy responses though traders still expect the bank to follow a more hawkish path. Indeed, BOJ member Uchida (dep gov) said today that the BOJ stands to ready to hike rates further if the economy develops in line with its forecasts. Uchida noted the impact of higher prices on households and consumers and said that while it was creating some difficulty for the bank in further tightening, it reinforced the need to bring inflation down.
Bearish Risks
Looking ahead, USDJPY looks poised to remain weak until/unless we hear some positive news on the US/China front. The longer we go with no news, the softer risk appetite is likely to get, driving further safe-haven support into JPY.
Technical Views
USJDPY
The reversal lower in USDJPY has seen the pair breaking back under the 146.81 level and back inside the bear trend line from YTD highs. Price is now testing support at the 144.32 level and the rising trend line from YTD lows. If this support area breaks, there is room for a deeper push towards the 140.59 lows again.
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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.