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At the start of trading in a quiet and short week, the USD/JPY pair stabilized around the resistance level of 151.20, halting a sharp decline amid concerns about the possibility of the Japanese authorities intervening again in the forex markets. In this regard, Masato Kanda, the country's top currency diplomat, said that the yen's weakness does not reflect fundamentals and described recent moves as speculative.
He added that he is closely monitoring the currency's movements with a sense of urgency and warned that he is ready to respond appropriately. According to the platforms of Forex currency trading companies, the price of the Japanese yen fell sharply last week, even after the Bank of Japan raised interest rates for the first time in 17 years and ended eight years of negative interest rates, in a decision that the markets considered clear. The central bank also abandoned its yield curve control policy, ended purchases of ETFs and J-REITs and reduced bond purchasing activities.
Meanwhile, Bank of Japan Governor Kazuo Ueda said that the central bank will maintain its accommodative stance for some time, keeping interest rates at 0%.
The Leading Economic Indicators Index in Japan, which is used to gauge economic expectations for the next few months based on data such as job openings and consumer confidence, was revised to 109.5 in January 2024 from 109.9 in the preliminary estimate. This is after being revised down to 109.9 in December 2023, which was the highest reading in 13 months, as the recovery in the Japanese economy remained fragile. Recently, the Japanese economy grew by 0.1% on a quarterly basis in the fourth quarter of 2023, amid uncertainty in global conditions. At the same time, factory activity continued to shrink in January.
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On the other hand, US stock futures were flat on Monday as investors continued to assess the economic and monetary policy outlook. Last week, the Dow Jones rose 1.97%, the S&P 500 jumped 2.29%, and the Nasdaq Composite rose 2.85%. All 11 S&P sectors rose last week, led by communications services, industrials, and technology. Consequently, these moves came at a time when the Federal Reserve reiterated its expectations for three cuts in US interest rates this year.
The US market's continued enthusiasm for artificial intelligence and related technologies also helped to boost this rally. Now, investors are looking forward to the US February Personal Consumption Expenditures Price Index report this week, which is the Federal Reserve's preferred measure of US inflation. Also, all three benchmark indices are on track for their fifth consecutive monthly gain/JPY Technical analysis and Expectations Today:
Despite recent selling pressure, the overall trend for the USD/JPY currency pair remains upward. There won't be a significant trend reversal without a move towards support levels at 150.45 and 149.20 respectively. So far, the trend will remain bullish as long as there is a clear contrast between the policies of the US Federal Reserve and the Bank of Japan, unless there is Japanese intervention in the markets to prevent further currency depreciation.
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