Usdjpy Closes The Week With Loss

Usdjpy Closes The Week With Loss by Andrew Blumer last updated on February 02, 2024

USD/JPY Closes The Week With 2% Loss, Fed Pivot In Focus

The USD/JPY failed to develop momentum on either side (bullish and bearish) and remained stuck near the 142.00 handle on Friday.

It appears that the markets now believe strongly in a policy pivot from the Fed starting as early as March 2024. According to forecasts, a minimum of 3 rate cuts will likely take place in 2024 that will be worth around 75 bps. This means the interest rate in the USA will be near 5.5% in 2024.

Selling Rally In US Dollar

The comments from the Fed chairman led to a selling rally in the USD and made it the worst currency against other FX majors. As a result, the USD/JPY also turned lower, which had more to do with the USD's weakness as opposed to the JPY's strength.

Next week, the market players will be looking at how the Bank of Japan handles its interest rate policy. Given the history of Japan's central bank, the chances of any rate hikes are very slim.

However, the markets still believe that the BoJ may issue a surprise at the upcoming meeting. That's why there's a high chance that the interest rate in Japan will remain near -0.1% with no change at all.

The decline in the USD/JPY occurred during the Wednesday when the Fed chairman expressed his views. This sent the Dollar/Yen pair lower toward the 141.00 support zone. However, the pair has managed to cross 142.00 before the week's end, but it is still in the red.

If we look at the weekly performance of USD/JPY from peak to trough, the price has changed by -3.85%. In addition, the USD/JPY has also turned further away from the 200 SMA on the hourly chart, which is now sitting at 145.00.

Despite the recent weakness, the USD is still up by 8% from its yearly opening price, which means not all is lost for the USD/JPY bulls.