31 January 2024, USD/JPY
Event to watch out for today:
21:00 EET - Federal Reserve System (Fed) Interest Rate Decision
USDJPY:
In the Asian session on Wednesday, the Japanese yen (JPY) regained positive momentum and is now trading near a one-week high against the US dollar. The deepening conflict in the Middle East is a cause for concern as it could trigger a wider war in the region. This concern is helping to offset the disappointing macroeconomic data from Japan and support the safe-haven Japanese Yen. Japanese retail sales and industrial production data fell short of market expectations, giving the Bank of Japan (BoJ) more reason to postpone discussion of an exit from negative interest rates. The BoJ's report from its 22-23 January meeting indicated that no policy changes are expected anytime soon, but JPY bulls remained unfazed.
The recent decline in US Treasury yields has narrowed the rate differential between the US and Japan, which has supported the Japanese Yen. Meanwhile, the US Dollar (USD) remains within a familiar range due to uncertainty over the timing of the Federal Reserve (Fed) interest rate cuts. This has further contributed to the supply tone around the USD/JPY pair. However, the downside remains subdued as traders prefer to wait and see ahead of the highly anticipated FOMC decision due today. Given the importance of this central bank risk event, caution is advised when making aggressive directional bets.
Trading recommendation: At the level above 148.30 we consider buying.
Monitor significant macroeconomic events using the Forex Economic Calendar.
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