Yen Continues Sliding Against US Dollar, Hits Near Two-Week Low

(JPY) The Japanese Yen continues sliding for the third consecutive day on Thursday, hitting a fresh two-week low against the US Dollar (USD) as the European session unfolds.

Highlights:

• Fresh Supply Boosts Japanese Yen Amid Disappointing Domestic Data.
• USD Gains Momentum as US Bond Yields Rise, Propelling USD/JPY Pair.
• Anticipation of Hawkish BoJ Pivot Likely to Mitigate Further JPY Losses

Read more: Japanese Yen Approaches 150 Mark While US Dollar Stabilizes

Yen Continues Sliding Amidst complex market dynamics

The latest data points to a pronounced contraction in Japan’s factory activity, marking the steepest decline in 10 months, exacerbated by a seismic 7.6 magnitude earthquake on New Year’s Day. This unsettling backdrop remains a pivotal factor contributing to the persistent weakening of the JPY. In contrast, lingering uncertainties regarding early interest rate cuts by the Federal Reserve (Fed) provide essential backing to US Treasury bond yields, serving as a notable tailwind for the Greenback and the ongoing descent of the USD/JPY pair. Nevertheless, USD bulls appear somewhat tentative amid escalating speculations that the US central bank could implement interest rate cuts as early as March. This sentiment is particularly relevant in light of the impending release of the influential Nonfarm Payrolls (NFP) report on Friday, anticipated to significantly impact the Fed’s future policy decisions and consequently influence short-term USD demand. Traders on Thursday may closely monitor the US economic docket, featuring the release of the ADP report on private-sector employment and the usual Initial Jobless Claims data, seeking valuable insights into market trends as the Yen continues sliding. Against the backdrop of firming expectations regarding a potential shift in the Bank of Japan’s (BoJ) stance and a prevailing softer risk tone, the safe-haven JPY’s losses are expected to be constrained. This may act as a mitigating factor, limiting any further appreciation of the USD/JPY pair, warranting a cautious approach for bullish traders closely following how the Yen continues sliding amid these complex market dynamics

Yen Reacts to Data, Policy Speculation, and US Economic Indicators

The Japanese Yen lost its Asian session gains due to weak domestic data, with the au Jibun Bank Japan Manufacturing PMI contracting for the seventh month to 47.9 in December. Despite challenges, the JPY is expected to find support in the anticipated 2024 policy shift aligning with the Bank of Japan and the Federal Reserve. The FOMC’s December minutes showed inflation control consensus but uncertainty about rate cuts, impacting US bond yields and the Dollar. The US ISM Manufacturing PMI improved to 47.4, signaling a sector slowdown. Labor Department’s JOLTS report indicated a drop in employment listings to 8.79 million in November. Investors await the US ADP report and Friday’s Nonfarm Payrolls (NFP) report for comprehensive employment insights.

Technical Analysis

From a technical perspective, the USD/JPY pair’s overnight move above the 143.00-143.10 confluence signals favorability for bullish traders. Confirmation requires sustained buying above 144.00, indicating a potential short-term bottom. Further upside momentum may target the 38.2% Fibonacci level at 144.65 and the psychological mark at 145.00. On the downside, the 143.15-143.10 region acts as immediate support, with a break below 142.85 opening the door to potential declines towards 142.00, 141.75, and the 141.00 round figure.

Conclusion

In conclusion, the Japanese Yen’s continuous slide against the US Dollar is influenced by a range of factors, including a significant contraction in Japan’s factory activity, an earthquake impact, and uncertainties surrounding potential interest rate cuts by the Federal Reserve. While the USD/JPY pair has shown bullish signals, traders are advised to exercise caution, considering the complex market dynamics. The upcoming release of key economic indicators, including the Nonfarm Payrolls report, is expected to further shape the USD/JPY pair’s direction. The Yen’s losses are somewhat constrained by expectations of a policy shift in Japan, indicating a nuanced outlook for traders navigating these market conditions.

Read more: US Dollar Declines to November Low, Japanese Yen Strengthens