- The Japanese Yen faces downward pressure as traders weigh the Bank of Japan's policy outlook.
- BoJ Governor Ueda suggested a careful evaluation of market and economic conditions before considering policy changes, signaling no immediate plans for rate hikes.
- The US Dollar struggles amid growing dovish sentiment regarding the Federal Reserve's policy direction.
The Japanese Yen (JPY) edged lower against the US Dollar (USD) on Wednesday as investors evaluated the Bank of Japan's (BoJ) monetary policy stance. On Tuesday, BoJ Governor Kazuo Ueda indicated that the central bank has ample time to assess market and economic conditions before considering any policy changes, suggesting no immediate need to raise interest rates.
Governor Ueda also highlighted that Japan’s real interest rates remain significantly negative, supporting economic growth and price increases. Additionally, Finance Minister Shunichi Suzuki reiterated his expectation that the BoJ will implement appropriate monetary policies while maintaining close coordination with the government.
Traders are now turning their attention to Thursday’s release of the BoJ Monetary Policy Meeting Minutes and Tokyo’s inflation data on Friday, which are expected to offer further insights into Japan's economic outlook and potential policy shifts.
Meanwhile, the USD/JPY pair is facing downward pressure as the US Dollar weakened following disappointing US consumer confidence data released on Tuesday, further fueling dovish expectations for the Federal Reserve’s upcoming policy decision.
Daily Digest Market Movers: Japanese Yen remains subdued amid uncertainty over BoJ policy outlook
- Federal Reserve Governor Michelle Bowman stated on Tuesday that key inflation indicators are still "uncomfortably above" the 2% target, emphasizing caution as the Fed proceeds with interest rate cuts. Despite this, she advocated for a traditional quarter percentage point reduction.
- The US Consumer Confidence Index dropped to 98.7 in September, down from a revised 105.6 in August, marking the steepest decline since August 2021.
- The Jibun Bank Japan Composite Purchasing Managers Index (PMI) fell slightly to 52.5 in September from 52.9 in August, which had marked a 15-month high. Despite the decline, private sector activity expanded for the eighth consecutive month, driven by the service sector, with the Services PMI rising to 53.9 from 53.7 in August.
- The S&P Global US Composite PMI increased at a slower pace, reaching 54.4 in September compared to 54.6 in August. The Manufacturing PMI unexpectedly contracted to 47.0, while the Services PMI exceeded expectations at 55.4.
- Minneapolis Fed President Neel Kashkari expects further rate cuts in 2024, though smaller than those from the September meeting. Chicago Fed President Austan Goolsbee and Atlanta Fed President Raphael Bostic echoed the need for more rate cuts, with Goolsbee highlighting the need for significant reductions in the coming year.
- Japan's new top currency diplomat, Atsushi Mimura, warned in an interview that past Yen carry trades have largely been unwound but cautioned that renewed carry trade activity could increase market volatility. Mimura emphasized ongoing market monitoring to prevent disruptions.
Technical Analysis: USD/JPY holds near 143.50, testing the upper boundary of a descending channel
The USD/JPY pair trades around 143.40 on Wednesday, hovering near the upper boundary of a descending channel, which reflects a bearish trend. The 14-day Relative Strength Index (RSI) sits slightly below the 50 level, indicating continued bearish momentum.
On the downside, the pair is testing support at the nine-day EMA around 143.03. A break below this level could lead to a decline toward the 139.58 region, the lowest since June 2023.
On the upside, the pair faces immediate resistance near 144.10, the upper boundary of the descending channel. A breakout above this level could push USD/JPY pair toward the psychological barrier at 145.00.
USD/JPY: Daily Chart
