May 14, 2024
The Japanese yen has lost ground against its major peers this year, a trend partly attributed to the Bank of Japan’s ultra-loose stance. While other central banks around the world have taken decisive action to combat inflation by aggressively raising borrowing costs, the BoJ has remained on the sidelines, maintaining its accommodative position.
However, the prolonged period of relaxed monetary policy in the Asian country appears to be coming to an end, with signs suggesting a possible exit from negative rates early in the second quarter. Such development might kick off a lasting recovery for the yen, promising sunnier days ahead for Japan’s currency.
BoJ’s pivot could coincide with annual compensation negotiations between Japanese businesses and labor unions, expected to conclude around mid-March. Should these discussions yield significant pay increases for workers that exceed 4.0%, policymakers might perceive it as confirmation of sustained wage growth on the horizon, the trigger needed to bid farewell to sub-zero rates.
We will gain greater clarity on the Bank of Japan’s policy outlook in the coming days and weeks, but expectations lean towards a potential rate hike in the April meeting, although the possibility of a move in March cannot be entirely dismissed. As traders prepare for this momentous event, the yen may slowly begin its journey toward recovery.
USD/JPY was largely flat on Friday, hovering just below resistance at 150.85. Traders need to watch this technical ceiling closely as a breakout could reinvigorate bullish momentum, setting the stage for a rally towards last year’s highs around the psychological 152.00 level.
Conversely, in the scenario of sellers regaining control and driving the exchange rate lower, support appears at 149.70 and 148.90 thereafter. Continued losses beyond these thresholds may lead to a pullback towards 147.50 in the near term.
EUR /JPY struggled to find a clear direction on Friday, fluctuating between marginal gains and losses while trading just below the overhead resistance at 164.00. Bears must vigorously protect this upper barrier; any breach could result in a rally toward trendline resistance at 165.20.
In the scenario of a market downturn, support emerges at 161.50, followed by 160.75. Continued weakness might draw attention to the 100-day simple moving average near 159.60. Below this floor, the 50-day simple moving average could provide additional support against further losses.
GBP /JPY pushed higher on Friday, briefly conquering a multi-year high above the 191.00 mark. With bulls in control of the market, we could see additional gains in the coming days, with the next resistance located at 192.50. On further strength, all eyes will be on 196.00, the 2015 peak.
On the flip side, if upward impetus fades and leads to a price pullback, initial support can be spotted at 190.00, followed by 188.50. Beneath this zone, bears could direct their attention to the 50-day simple moving average, situated close to 185.50.
