Increasing, Yet Down

The USD/JPY currency pair sustained the offered tone around it throughout the North American session. Nevertheless, it has tried to recover a few points from its daily low point. The pair was observed to be trading in the area of 127.40 to 127.35.

However, the pair is still down by more than 0.40% on the daily trade. The deteriorating economic perspective all over the world continues to weigh on investors’ sentiments. It thereby triggered a new dispensation of risk aversion transactions.

USD/JPY price chart. Source TradingView

In turn, this helped to increase demands for conservative safe-haven commodities. The Japanese Yen gained more demand in the market but exerted pressure on the pair. The USD/JPY pair lost some inflow as a result of the risk-off mood.

The counter-risk movement was further supported by a new drop in the US Treasury bond yields. The move further served as an inspiration to bearish traders. It also joined forces to pull down spot prices toward the monthly low point.

The low points are cushioned, however, at least for the present period. This is with the resurgence of more purchases of the US Dollar. 

Fed-BOJ Policy Divergence Aids the Pair

Aside from that, the policy divergence between the Fed and the BOJ contributed to things. It aided the USD/JPY pair in securing support ahead of 127.00. it is the round-figure benchmark that the pair desperately needs.

Therefore, it is good for investors to wait on the sideline for a while. They should see some follow-up sales before they stake any move on depreciation.

The market is currently looking forward to economic dockets in the United States. It is expected to feature the publication of the Purchasing Managers’ Index for May. It should also feature the new house sales and the manufacturing index from Richmond. 

This as well as the speech from Jerome Powell will influence the dollar dynamics. The US Treasury bond yields will also influence the dollar dynamics. It will then give some momentum to the USD/JPY currency pair.

Traders will be taking a cue from the general market’s risk sentiments. This will help them seize any trading opportunities around the USD/JPY pair.

Earlier, the BOJ’s Nakamura said investors should brace for continuous quantitative easing. The bank believes that the easing would help boost the economy. Koji Nakamura is the head of BOJ’s monetary policy drafting.

The aim of continuing the loose policy is to get prices increasing. It is projected to benefit the economy in the long run.

The US Dollar index oscillated over 102.24 while the market expected Jerome Powell’s speech. It is expected that the speech will give direction on the next rate increases from the Feds. It will offer clarity about the extent of the coming two rates.

Hawkish guidance is expected to come from the Fed’s Chairman in the midst of agitations. The BOJ holds on to its loose monetary policies.