USD/JPY Trades Sideways around 133.20 as Yields Rise and BoJ's Ueda Defends Easy Monetary Policy
USDJPY trades sideways as it remains relatively unchanged in early European trading on Thursday at around 133.20 . Despite the mild recovery in the US Treasu ry bond yields, Bank of Japan (BoJ) Governor Kazuo Ueda defends the central bank's ultra-easy monetary policy, providing some support for the currency pair. Traders, however, seem to be waiting for more concrete economic data or policy announcements to determine USDJPY's next move.
BoJ's Ueda Reiterates Easy Monetary Policy at G7 Gathering
In his speech at the Group of Seven (G7) nations’ gathering in Washington, BoJ's Ueda stated that the bank will continue monetary easing until the price target is stable and sustained. He also mentioned that Japan's consumer inflation is around 3% but is likely to decrease soon.
Mild Gains in US Treasury Bond Yields as USD/JPY Remains Sidelined
The US 10-year and two-year Treasury bond yields increased slightly, with gains around 3.41% and 3.98% respectively. However, the US 10-year Treasury bond yields snapped a three-day uptrend with mild losses to around 3.40%, while the two-year counterpart also eased to 3.96% by marking the first daily negative in five.
Japan's Recall of Emergency Evacuation Order Provides Tailwind to Risk Barometer Pair
Japan's recalling of the emergency evacuation order after North Korean missile testing also provided a tailwind to the risk barometer pair.
Odds of US Fed's Policy Pivot Increase Amid Downbeat Inflation Data and Unimpressive FOMC Minutes
The odds of the US Federal Reserve's (Fed) policy pivot increased after downbeat US inflation data and unimpressive Federal Open Market Committee (FOMC) Minutes. This, in turn, drowned the US Dollar and Treasury bond yields the previous day, especially amid the recession woes.
On Wednesday, US Consumer Price Index (CPI) dropped to the lowest level since May 2021, to 5.0% YoY in March from 6.0% prior and versus 5.2% market forecasts. However, the annual Core CPI, namely the CPI ex Food & Energy, improved to 5.6% YoY during the said month while matching forecasts and surpassing 5.5% prior.
On the same line, the Minutes of the latest FOMC Monetary Policy Meeting also challenged the Fed hawks by stating that the expectations for rate hikes were scaled back due to the turmoil in the banking sector. Furthermore, the latest comments from the Fed policymakers, including San Francisco Federal Reserve Bank President Mary Daly and Richmond Federal Reserve President Thomas Barkin, suggest easing inflation and challenges to the hawkish Fed, as well as for the US Dollar.
Amid these plays, S&P 500 Futures print mild gains despite downbeat Wall Street closing, whereas Japan's Nikkei 225 rise 0.60% intraday as we write.
Although a light calendar and mixed mood restrict USD/JPY moves of late, today’s US Producer Price Index (PPI) for March and Friday’s preliminary readings of the Michigan Consumer Sentiment Index for April can entertain the Yen pair traders.
Technical analysis
Repeated failures to cross the 200-day Exponential Moving Average (EMA), around 133.75 by the press time, tease USD/JPY bears to aim for a three-week-old support line, near 131.30 at the latest.
Impact of Bank of Japan and US Federal Reserve on Forex Trading
The forex market is closely watching the developments in the US and Japan, which are major players in the global economy. The Bank of Japan's decision to maintain its ultra-easy monetary policy has a significant impact on the yen, which is one of the major currencies traded in the forex market. Similarly, the US Federal Reserve's monetary policy decisions and economic data releases, such as the recent drop in CPI, can cause volatility in the US dollar and affect USD/JPY exchange rates. As a result, forex traders are keeping a close eye on these events to capitalize on any potential opportunities in the market.