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Traders are wary of bullish bets on the yen

Traders are wary of bullish bets on the yen | 07 February 2024

07 February 2024, USD/JPY

Traders are wary of bullish bets on the yen

Events to watch out for today:

15:30 EET. USD - Foreign trade balance

17:30 EET. USD - Crude oil inventory data from the Department of Energy

USDJPY:

The Japanese yen rose during the Asian session on Wednesday and is now looking to consolidate its good bounce off the lows. Market participants, convinced that wage growth this year could exceed the rate of growth in 2023 and pave the way for the Bank of Japan to exit its decade-long loose monetary policy. Ongoing concerns over geopolitical tensions caused by conflicts in the Middle East and slowing economic growth in China continue to serve as a tailwind for the yen. This, along with the US Dollar's overnight pullback from its highest level in nearly three months, is putting some downward pressure on the USD/JPY pair.

Japanese real wages fell for the 21st consecutive month in December and household spending fell for the tenth consecutive month, which is seen as an unwelcome development for the Bank of Japan. This, along with bullish sentiment in global stock markets, may deter traders from making new bullish bets on the yen. Recent favourable US macroeconomic data, including Friday's jobs report, and recent tough talk from Federal Reserve (Fed) officials have dashed expectations of more aggressive policy easing in 2024. This supports rising US Treasury bond yields, which favours USD bulls and should help limit a significant fall in USD/JPY.

Trade recommendation: Trading with buy orders

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David Johnson
Analyst of «FreshForex» company
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