USDJPY Risen Above The Significant Level

USDJPY Risen Above The Significant Level 


Setting the Stage for Gains

The USDJPY pair has exhibited upward momentum for the second consecutive day, propelled by a confluence of factors. A combination of a milder Tokyo Consumer Price Index (CPI) report, the Bank of Japan's (BoJ) continued dovish stance, and a robust performance of the USD has lifted the pair. As trading commences on Friday, the spot prices of USD/JPY have risen above the significant 146.00 level during the Asian session. This movement indicates the potential for further appreciation, potentially reaching the year-to-date (YTD) peak achieved last week.

Factors Pressuring the Japanese Yen

The Japanese Yen (JPY) remains under pressure as concerns about immediate intervention by authorities subside and the Bank of Japan (BoJ) maintains its accommodative approach. Notably, the former head of the BoJ's foreign exchange division, Atsushi Takeuchi, stated that Japan is unlikely to intervene in the market unless the Yen plunges below 150 against the US Dollar (USD). This dovetails with the BoJ's consistent use of negative rates and emphasizes the condition of sustainable wage growth as a prerequisite for altering its substantial monetary stimulus measures.

Tokyo Inflation Eases, BoJ's Monetary Policy Persists

Fresh data indicates a slower-than-expected growth in consumer inflation within Tokyo during August. While the headline Tokyo CPI declined to a 2.9% year-on-year rate from the previous 3.2%, the core figure, which excludes volatile components like food and energy costs, remained at an elevated 4%, marking its highest level in over four decades. Despite this, the data reinforces the BoJ's commitment to its loose monetary policy. Conversely, hawkish remarks from various Federal Reserve (Fed) officials have kept the possibility of another 25 basis points rate hike by year-end open.

Fed's Stance and USD Performance

Boston Fed President Susan Collins suggested that the Fed might maintain current interest rates, while still acknowledging the potential for further rate hikes. Philadelphia Fed President Patrick Harker supported a restrained approach, indicating that inflation must decrease before rate cuts become viable. These stances have bolstered US Treasury bond yields, propelling the USD to its highest level since early July. This strength provides additional support to the USD/JPY pair, though traders are likely to tread cautiously prior to Fed Chair Jerome Powell's speech at the Jackson Hole Symposium.

Forex Market Implications and Technical Outlook

For Forex traders, the evolving narratives surrounding the Fed's interest rate trajectory and the persistently dovish BoJ hold significance. The USD's strength against the JPY, propelled by these factors, has influenced the USD/JPY pair's recent gains. As traders analyze the fundamental landscape and anticipate Powell's speech, the path ahead for USD/JPY remains optimistic. Technical analysis reveals various levels of interest, with key price points including the daily Fibonacci levels and pivot points.

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