English
The USD/JPY Pair Stays In The Red For a Second Consecutive Day, But Manages To Hold Above Mid-145.00s
The USD/JPY pair meanders lower for the second consecutive day on Wednesday, albeit without conviction. A modest decline in US bond yields keeps the USD on the defensive and exerts pressure on the currency. Ahead of the flash US PMI prints, the divergent BoJ-Fed policy stance serves to limit the downside.
The USD/JPY pair remains under some selling pressure for a second consecutive day on Wednesday, despite the lack of follow-through and confinement within a familiar range held for roughly the last half-week. Throughout the Asian session, spot prices maintain a position above the mid-$145.00s, and the fundamental backdrop warrants adverse traders to exercise caution.
The US Dollar (USD) edges lower in response to a slight decline in US Treasury bond yields, which proves to be a significant factor bearing on the USD/JPY pair. Aside from this, fears of an intervention by Japanese authorities to support the domestic currency, as well as looming recession risks, benefit the Japanese Yen's safe-haven status and contribute to the prevailing sentiment encircling the major. However, a significant divergence between the Bank of Japan's (BoJ) monetary policy stance and that of other major central banks, such as the Federal Reserve (Fed), should help limit losses for spot prices.
Notably, the Bank of Japan is the only central bank in the world with negative interest rates. In addition, policymakers have emphasised that a sustainable wage increase is a precondition for considering the elimination of the enormous monetary stimulus. In contrast, it is anticipated that the US central bank will maintain its hawkish stance and maintain higher interest rates for an extended period of time in response to a robust domestic economy. Aside from this, the latest optimism regarding signs of easing US-China trade tensions may prevent the JPY from appreciating further and provide some support for the USD/JPY pair.
In the latest development in the US-China conflict, the Bureau of Industry and Security (BIS) of the US Department of Commerce announced on Monday that it is removing 27 Chinese entities from its Unverified List. This boosts investor confidence ahead of US Commerce Secretary Gina Raimondo's trip to China from August 27 to 30. In addition, according to White House National Security Advisor Jake Sullivan, Raimondo will convey the message that the United States is not seeking to decouple from China, but rather to "de-risk" relations. This may discourage traders from positioning for a significant decline in the USD/JPY pair.
Market participants may also choose to remain on the margins ahead of the crucial Jackson Hole Symposium, where the remarks of Fed Chair Jerome Powell will be analysed for hints about the future path of rate hikes. In turn, this will have a significant impact on USD price dynamics and help determine the next leg of the USD/JPY pair's direction. In the interim, traders will take cues from the publication of the flash PMI prints from the United States, which will provide fresh insights into the state of the economy and whether the Federal Reserve can afford to raise interest rates further.
Bonus rebate to help investors grow in the trading world!
