Japanese Market Commentary - Friday, April 5

Yen, Money, Wealth, Japanese Yen

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BOJ Tightening Expectations

USDJPY has recovered off the day’s lows with the pair trading back in the green now ahead of key US labor market readings due later today. JPY had been stronger initially on comments today from BOJ governor Ueda which appeared to strengthen the chances of further near-term rate hikes. Ueda explained that the bank now feels its inflation target will likely be satisfied through summerfall with wage hikes reflected in higher consumer prices through the summer.
 

Intervention Risks

Ueda’s comments have been seen as a subtle signal that the bank is likely to press ahead with further tightening through this time period. The timing of Ueda’s remarks is certainly interesting given the current speculation around potential intervention in JPY FX rates. The Yen has failed to strengthen on the back of the recent, historic rate cut from the BOJ. With USDJPY remaining near record highs, Japanese officials have warned that they stand ready to intervene if necessary in order to bring JPY down.
 

Ueda Says Not Targeting FX

However, in his own comments, Ueda refused to comment on short-term FX moves. The BOJ boss told reporters that the bank does not target FX rates though they are considered when setting policy. Ueda went on to say that the bank will continue to work with the government, though, in monitoring FX moves and their impact on the economy and prices.
 

NFP Flashpoint Risks

Looking ahead today, US jobs might prove a flashpoint for JPY. If we see USDJPY breakout higher on any surprise upside in the data, this might well be the last straw, triggering intervention from Japanese officials. As such, plenty of risk for USDJPY into today’s data.
 

Technical Views

USDJPY

For now, USDJPY continues to stall at the 151.81 level following the rally off the 147 lows. Momentum studies have faded though focus remains on an eventual breakout higher with 155.19 the next target for bulls. To the downside, 148.98 will be initial support ahead of deeper support at 145.  


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