USDJPY Losses Further Ground, but 150.0 Remains In Focus

Summary:

USDJPY has gone under the 150.0 psychological level, but the dollar is unlikely to go down by a wide margin ahead of FOMC minutes release.

USDJPY is below the 150.00 mark in the early London session, after shedding -0.16% to trade at 149.956 at 10.00 am GMT. The Japanese yen has gained some strength after a positive monthly core machine orders data showed a +2.7% growth in December, from a -4.9% decline in November. The yen had been under pressure over the past three sessions, after data showed that Japan’s economy had undergone a surprise contraction in the fourth quarter of 2023.

The yen’s latest gains mean that the BoJ will likely opt against intervening in the currency market right away. Therefore, traders will be looking for hints from the Fed’s last meeting minutes when they come out on Wednesday. Japan’s Finance Minister Shunichi Suzuki stated over the weekend that while the BoJ ultimately holds the powers over monetary policy, it will likely have to raise interest rates in the coming days.

Notwithstanding the current gains by the yen, the USDJPY pair is unlikely to go down by a wide margin. The dollar is currently being supported by a bullish sentiment created by a higher-than-expected Producer Price Index print for January. The figure showed that the cost of producer goods rose by 0.3%, from December’s -0.2%, the largest rise since August 2023. Importantly, this indicates that the US economy is still heating up, making it likely that the Fed will maintain the current high interest rates for longer. Also, rising US Treasury yields will likely hold the US dollar from slipping further. Yields on the benchmark 10-year Treasury bonds were up by 4 basis points at the time of writing.

Technical analysis

The USDJPY will likely pivot around the 150.15 mark, but the RSI indicator signals a mixed momentum, leaning towards bearishness. The seller-centric market looks set to establish the first support at 149.75, and sustained selling pressure could see the pair test 149.55. Alternatively, the buyers will need to ensure the price stays above the 150.15 pivot for a chance to push beyond the first resistance at 150.40. Furthermore, a break above 150.40 could build the momentum to test 150.60, invalidating the bearish view.