Strong Yen on Monday
USDJPY has come under fresh selling pressure on Monday amidst an uptick in BOJ tightening expectations. The shift comes in response to data overnight which showed that the Japanese economy grew more than expected in Q4 driven by stronger capex and an unexpected rise in household consumption. The data has now cemented expectations that the BOJ will press ahead with more tightening in the near-term. With quarterly GDP seen soaring to 0.7% from 0.3% prior and expected, traders are betting on a response from the BOJ, particularly given that households consumption grew much stronger than real consumption, creating fresh inflationary risks for the BOJ.
Weaker USD, Fed Easing Expectations
In contrast with a stronger Yen and hawkish BOJ expectations, USD has been weaker recently and near-term Fed easing expectations have crept back up in response to weaker data. USD has weakened recently amidst a perceived softening in trade war risks linked to Trump’s shift on reciprocal tariffs which will now be on a country-by-country basis.
Shifting Safe-Haven Flows
Additionally, the prospect of an end to the war between Russia and Ukraine has weighed on USD recently, sapping safe-haven demand for the greenback. Any further, positive headlines linked to this situation should keep USD further pressured near-term, as will the Hamas-Israel ceasefire being maintained. Looking ahead this week, traders will also be watching incoming US data with any fresh weakness likely to see USDJPY push down deeper.
Technical Views
USDJPY
The recent failure at the 154.74 level has put the focus back on a fresh push lower, with price currently sitting just above the YTD highs. If we break lower here, 149.30 will be next support to watch, followed by 146.81, in line with falling momentum studies readings. Meanwhile, bulls need to see a break back above the 154.74 level to alleviate near-term bearish risks.
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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.