Image Source: Pixabay
 

The Japanese Yen (JPY) remains depressed near the weekly low against its American counterpart following the Bank of Japan's (BoJ) widely expected decision to leave short term rate on hold. Traders, however, refrain from placing fresh bets and opt to wait for cues about the likely timing of further policy tightening. Hence, BoJ Governor Kazuo Ueda's remarks during the post-decision press conference will play a key role in influencing the near-term JPY price dynamics.

In the meantime, domestic political uncertainty, along with concerns about Japan's fiscal health and the upbeat market mood, continues to undermine the safe-haven JPY. Apart from this, a modest US Dollar (USD) uptick acts as a tailwind for the USD/JYP pair. However, expectations that government authorities could intervene to stem further weakness in the domestic currency warrant some caution for the JPY bears and before positioning for any further downfall.

Japanese Yen retains bearish bias amid political uncertainty, fiscal concerns
 

• As was widely expected, the Bank of Japan board members decided to maintain the short-term interest rate at 0.75%, following the conclusion of the two-day monetary policy review meeting on Friday.
• The spotlight now turns to BoJ Governor Kazuo Ueda's post-decision press conference, which determine the near-term trajectory for the Japanese Yen and provide a fresh impetus to the USD/JPY pair.
• Data released earlier today showed that Japan's National Consumer Price Index fell from the 2.9% YoY rate to 2.1% in December, while CPI excluding fresh food arrived at 2.4% compared to the 3.0% in November.
• Additional details revealed that the National CPI excluding fresh food and energy slowed to the 2.9% YoY rate in December from 3.0% in the previous month, though it remains well above the BoJ's 2% annual target.
• The data reaffirms market expectations of further BoJ policy tightening. Moreover, a private-sector survey showed that Japan's manufacturing activity expanded in January for the first time in seven months.
• In fact, the S&P Global flash Japan manufacturing PMI rose to 51.5 in January, or its highest level since August 2024. Adding to this, the gauge for the service sector also picked up and rose to 52.8 from 51.1.
• Japan's Prime Minister Sanae Takaichi will dissolve parliament on Friday ahead of a snap election on February 8, hoping for a stronger mandate to push through her ambitious fiscally expansionary policies.
• Investors, however, gave a thumbs down to Takaichi’s proposal to cut the 8% food consumption tax for two years, which led to the recent free fall in government bonds and continues to weigh on the JPY.
• Geopolitical tensions eased dramatically after US President Donald Trump announced on Wednesday a potential deal with NATO involving Greenland, further undermining the JPY's safe-haven status.
• Meanwhile, hawkish BoJ expectations mark a significant divergence in comparison to the growing acceptance that the US Federal Reserve will lower borrowing costs at least two more times this year.
• Apart from this, the broader de-dollarization trend offsets Thursday's upbeat US data and dragged the US Dollar back closer to a two-week low, which might further contribute to capping the USD/JPY pair.

USD/JPY could accelerate move up once ascending channel hurdle is cleared
 

The 100-hour Simple Moving Average (SMA) edges higher at 158.16, and the USD/JPY pair holds above it, keeping the near-term tone bullish. The Moving Average Convergence Divergence (MACD) line sits marginally below the Signal line around the zero mark, with a small negative histogram that reinforces a cautious momentum backdrop. The Relative Strength Index (RSI) prints 56, slightly above the midline, suggesting steady buying interest. The ascending channel from 157.35 supports the uptrend, with resistance near 158.91. A decisive break could extend gains.

Price action respects the ascending structure, while the 100-period SMA continues to rise at 158.16 and acts as nearby support. The MACD remains below the Signal line and just under the zero level, while the negative histogram contracts, suggesting fading bearish pressure that could give way to renewed upside if momentum improves. RSI improves toward 56 from the mid-40s, aligning with stabilizing buying interest. Initial support stands near the lower channel boundary at 157.96. A failure to hold the channel floor would shift attention to downside risks.

More By This Author: