The USD/JPY pair is currently consolidating near a one-and-a-half-month peak as bulls turn cautious amid a mixed fundamental backdrop. The Japanese Yen is facing pressure from the Bank of Japan’s decision to hold off on discussions around JGB tapering, as well as a bullish tone in global equity markets which is denting demand for the safe-haven currency. Despite this, concerns about potential intervention by Japanese authorities, geopolitical tensions, and political uncertainty in Europe are likely to limit downside for the JPY.
BoJ Governor Kazuo Ueda’s hawkish remarks regarding a possible rate hike in July could also prevent aggressive selling of the JPY. On the other hand, the US Dollar is struggling to attract buyers and remains near a weekly low as markets expect the Federal Reserve to cut interest rates twice this year. This could keep gains for the USD/JPY pair in check.
Looking ahead, traders are focusing on US economic data releases including Initial Jobless Claims, the Philly Fed Manufacturing Index, Building Permits, and Housing Starts. Additionally, developments in US bond yields and Fedspeak will shape USD price dynamics and provide momentum for the USD/JPY pair. Traders will also be monitoring broader risk sentiment and upcoming data releases including Japan National Core CPI and global flash PMI prints on Friday for short-term trading opportunities.
In conclusion, the USD/JPY pair is facing a cautious trading environment as bulls remain wary amid mixed fundamental cues. While the JPY is pressured by the BoJ’s stance and a positive global equity market sentiment, concerns about potential intervention, geopolitical tensions, and political uncertainty could limit downside. On the other hand, the USD is struggling to gain momentum as markets anticipate rate cuts by the Fed. Traders will be closely watching US economic data and global sentiment for direction in the near term.
