USD/JPY Maintains Defensive Position Close to the 122.60 Zone; Decline Seems Controllable

Down and Up Again in No Time

The USD/JPY currency pair has regained a few points from its daily low point, which it struck in the early hours of trading on Tuesday. At the time of putting this report together, it was last seen trading marginally over the mid-122.00 zones in the course of the early European session. It was down by more than 0.20% on today’s trading.

USD/JPY price chart. Source TradingView

After its desperate struggle to get back up over the 123.00 significant figure benchmarks, the USD/JPY currency pair slid to a lower place during trading on Tuesday as speculations spread that there would be an official response to the latest weakness suffered by the Japanese yen. As a matter of fact, the Governor of the Bank of Japan, Governor Kuroda Haruhiko, stated the keyword “intervention” while delivering an address earlier on Tuesday. The statement caused a fall in the value of the currency pair.

Aside from that, the look of gloom surrounding the geopolitical crisis in Eastern Europe also weighs heavily on the sentiment of investors, and it has been driving some safe-haven funds in the direction of the Japanese yen. That been noted, Governor Kuroda reaffirmed that the Bank of Japan would be offering to purchase an unlimited number of the Japanese Government ten-year bond if there is a rapid increase in long-term interest rates. That policy decision has helped the USD/JPY pair get some support close to 122.35 zones.

100 Basis Points Rate Increased Fully Priced In

Meanwhile, across the Pacific in the United States of America, increasing expectations that the Federal Reserve will take a more aggressive policy stance and make the pace faster has served to underpin the US dollar. According to reports, the market has fully priced in 100 basis points of an interest rate increase in the next two meetings of the Federal Reserve. The reinforcement of this came from the increased US Treasury bond yields. It was considered a new factor acting as a tailwind in favor of the pair.

As a result of the above, the main focus of the market will now be on the minute from the policy meeting of the Federal Open Market Committee set to be published on Wednesday. While at that, new reports about Russia and Ukraine, especially the diplomatic efforts to get a ceasefire agreement, might be influential over the USD/JPY currency pair. Aside from that, again, the American ISM Service and Purchasing Managers’ Index are expected to provide trading opportunities for the short term.   

Leave a Reply

Your email address will not be published. Required fields are marked *