The Japanese Yen (JPY) struggled to capitalize on its moderate intraday gains against the US Dollar (USD) on Monday and remained close to the lowest level since November 28, which was reached last week. Investors seem confident that the Bank of Japan (BoJ) will show no willingness to end negative interest rates or alter the Yield Curve Control (YCC) policy at the conclusion of the two-day meeting on Tuesday. This situation, combined with a positive sentiment in the stock market, weakens the safe-haven currency JPY.

Additionally, the possibility of an early rate cut by the Federal Reserve (Fed) provides a boost for the US Dollar (USD) and helps the USD/JPY pair attract some buying interest around the 147.75-147.70 area. Moreover, concerns about China's economic slowdown and the risk of heightened geopolitical tensions in the Middle East might limit optimistic moves in the market. This, in turn, is expected to limit significant downside movements for the JPY ahead of the much-anticipated BoJ decision.

Daily Market Summary: Japanese Yen Struggles to Attract Key Buyers Ahead of BoJ Decision

  1. The Japanese Yen failed to extend its intraday gains as it is expected that the Bank of Japan will not change its highly dovish monetary policy on Tuesday.
  2. Friday’s data showed a drop in Japan’s headline Consumer Price Index (CPI) and core index, reinforcing predictions that the BoJ will remain on its accommodative policy.
  3. An earthquake on New Year’s Day and weak domestic wage growth further strengthen the belief that the BoJ will not exit its accommodative regime.
  4. US Consumer Sentiment Index rose to 78.8, the highest level since July 2021, according to Friday’s preliminary University of Michigan survey report.
  5. Traders see May as a potential time for the Fed’s rate-cut announcement, with the odds of action at the March meeting falling to 50% according to CME Group’s FedWatch Tool.
  6. 12-month consumer inflation expectations are at a three-year low, strengthening the view that the US central bank will cut rates in the first half of this year.
  7. Geopolitical tension risks in the Middle East and China’s economic crisis are pressuring the USD/JPY pair as the JPY is considered a safe haven.
  8. The US launched strikes against Houthi anti-ship missiles, increasing tensions in the Middle East.
  9. There have been 140 attacks on US bases since October 17, including a major strike on the Ain al-Assad base in Iraq.
  10. Iran vowed to retaliate for the Damascus strike that killed five military officials, allegedly carried out by Israel.
  11. Clashes between Israeli forces and Hamas fighters occurred, accompanied by massive bombings in Khan Younis, southern Gaza Strip.
  12. Israeli Prime Minister Benjamin Netanyahu rejected a two-state solution and aims to maintain security control over the entire West Bank area.


Warning!

This analysis is based on fundamental and technical views from trusted sources and is not intended as advice or solicitation. Always remember that this content is meant to enrich the reader’s information. Always conduct independent research on other forex information as a reference for your trades.

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