USD/JPY Gains Momentum as Risk Sentiment Improves Ahead of Central Bank Events
During the Asian session on Tuesday, the USD/JPY pair showed a slight upward movement, although without strong follow-through. The rise in the pair was primarily driven by a positive risk tone in the market, which weakened the safe-haven appeal of the Japanese Yen and provided some support to the US Dollar.
Investors appeared to be cautious and hesitant, choosing to wait for key central bank events scheduled for the week. The recent rebound of approximately 70-75 pips from the 140.75 area contributed to the positive momentum in the USD/JPY pair, which is currently trading just above the mid-141.00s. This places the pair within striking distance of the two-week high reached last Friday.
Despite concerns about a potential global economic downturn, investor confidence has been bolstered by hopes of additional stimulus measures. China's National Development and Reform Commission (NDRC) unveiled new measures aimed at encouraging private investment in certain infrastructure sectors and strengthening financing support for private projects. As a result, equity markets generally displayed a positive sentiment, leading to a decrease in demand for the safe-haven JPY and benefiting the USD/JPY pair.
Adding to the downward pressure on the JPY is the expectation that the Bank of Japan (BoJ) will maintain its dovish stance following a two-day meeting ending on Friday. A government spokesperson stated that Japan's inflation is likely to slow to around 1.5% next year when excluding one-off factors. However, currency diplomat Masato Kanda believes that recent inflation and wage increases have surpassed expectations, supporting the possibility of an upgrade in the BoJ's inflation forecasts. This uncertainty surrounding the BoJ's policy stance has deterred traders from taking strong positions on the USD/JPY pair.
Meanwhile, the US Dollar has been consolidating its recent gains, recovering from its lowest level since April 2022, which was reached last week. However, the USD's performance has not significantly impacted the USD/JPY pair at this stage. Market participants are displaying caution and are opting to stay on the sidelines until the conclusion of important central bank events scheduled for this week.
The Federal Reserve (Fed) is expected to announce its policy decision on Wednesday, with a 25 basis points rate hike widely anticipated. However, investors remain uncertain about the possibility of a more dovish policy stance or the Fed's commitment to a 50 basis points rate hike by the year-end.
As a result, all eyes are on the accompanying monetary policy statement and Fed Chair Jerome Powell's post-meeting press conference for any indications about the Fed's future rate-hike plans. Such insights will be crucial in shaping the near-term dynamics of the USD. Subsequently, the market's focus will shift to the BoJ's monetary policy update on Friday, along with key US macroeconomic releases, including the Advance Q2 GDP report and the Core PCE Price Index (the Fed's preferred inflation gauge). These events will play a crucial role in determining the next directional move for the USD/JPY pair.
TurnAround Point: 141.00
Our preference
Long positions above 141.00 with targets at 141.65 & 141.95 in extension.
During the Asian session on Tuesday, the USD/JPY pair showed a slight upward movement, although without strong follow-through. The rise in the pair was primarily driven by a positive risk tone in the market, which weakened the safe-haven appeal of the Japanese Yen and provided some support to the US Dollar.
Investors appeared to be cautious and hesitant, choosing to wait for key central bank events scheduled for the week. The recent rebound of approximately 70-75 pips from the 140.75 area contributed to the positive momentum in the USD/JPY pair, which is currently trading just above the mid-141.00s. This places the pair within striking distance of the two-week high reached last Friday.
Despite concerns about a potential global economic downturn, investor confidence has been bolstered by hopes of additional stimulus measures. China's National Development and Reform Commission (NDRC) unveiled new measures aimed at encouraging private investment in certain infrastructure sectors and strengthening financing support for private projects. As a result, equity markets generally displayed a positive sentiment, leading to a decrease in demand for the safe-haven JPY and benefiting the USD/JPY pair.
Adding to the downward pressure on the JPY is the expectation that the Bank of Japan (BoJ) will maintain its dovish stance following a two-day meeting ending on Friday. A government spokesperson stated that Japan's inflation is likely to slow to around 1.5% next year when excluding one-off factors. However, currency diplomat Masato Kanda believes that recent inflation and wage increases have surpassed expectations, supporting the possibility of an upgrade in the BoJ's inflation forecasts. This uncertainty surrounding the BoJ's policy stance has deterred traders from taking strong positions on the USD/JPY pair.
Meanwhile, the US Dollar has been consolidating its recent gains, recovering from its lowest level since April 2022, which was reached last week. However, the USD's performance has not significantly impacted the USD/JPY pair at this stage. Market participants are displaying caution and are opting to stay on the sidelines until the conclusion of important central bank events scheduled for this week.
The Federal Reserve (Fed) is expected to announce its policy decision on Wednesday, with a 25 basis points rate hike widely anticipated. However, investors remain uncertain about the possibility of a more dovish policy stance or the Fed's commitment to a 50 basis points rate hike by the year-end.
As a result, all eyes are on the accompanying monetary policy statement and Fed Chair Jerome Powell's post-meeting press conference for any indications about the Fed's future rate-hike plans. Such insights will be crucial in shaping the near-term dynamics of the USD. Subsequently, the market's focus will shift to the BoJ's monetary policy update on Friday, along with key US macroeconomic releases, including the Advance Q2 GDP report and the Core PCE Price Index (the Fed's preferred inflation gauge). These events will play a crucial role in determining the next directional move for the USD/JPY pair.
TurnAround Point: 141.00
Our preference
Long positions above 141.00 with targets at 141.65 & 141.95 in extension.
✅ TELEGRAM CHANNEL: t.me/+VECQWxY0YXKRXLod
🔥 UP to 4000$ BONUS: forexn1.com/broker/
🇺🇸 US ZERO SPREAD BROKER: forexn1.com/usa/
🟪 Instagram: www.instagram.com/forexn1_com/
🔥 UP to 4000$ BONUS: forexn1.com/broker/
🇺🇸 US ZERO SPREAD BROKER: forexn1.com/usa/
🟪 Instagram: www.instagram.com/forexn1_com/
