Usdjpy Remains Weak As Us Demand Fades

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Usdjpy Remains Weak As Us Demand Fades

USD/JPY Remains Weak Near 148.50 As USD Demand Fades

A day earlier, the USD/JPY managed to stage a strong rally and gained 145+ pips. The sudden buying interest allowed the USD/JPY to jump from its lows of 147.15, which was a multi-month low.

For now, the pair is trading near 148.50 but is at a greater risk of downside amid a subdued price action of the USD. For now, it looks like the 148.00 support will hold, but that could change soon.

Hawkish FOMC Comments And BOJ Policy Shift

The jump in the USD/JPY was the result of hawkish FOMC minutes as the Fed officials discussed their policy measures to contain the inflation. However, it feels like the focus has now shifted away from the fact that higher interest rates are for a longer period of time. Instead, the markets want to focus on the rumor that the FOMC meeting in April & May 2024 will lead to rate cuts.

So, while the USD/JPY did manage to stage an upward rally, it is now coming under pressure as the pair isn't moving higher. On the other hand, rumors are on the rise that the BOJ will finally end its policy of negative interest rates starting in 2024.

This suggests that the fundamental setup supports a bearish USD/JPY as the policy changes in 2024 will favor a stronger Japanese Yen.

The rumors surrounding the BOJ are based on the recent decisions taken by the central bank. For starters, the central bank decided to adjust its YCC policy, which has impacted the long-term interest rates. In addition, the BOJ's governor talked about how they will be able to achieve the 2% target of inflation without having to wait for any changes in the real wages.

All of this can be used to deduct that the recovery in the USD/JPY is nothing but a short covering rally. After all, the pair is already down by 500 pips from a high of 152.00. So, in the next few days, analysts believe that the USD/JPY will turn lower and will likely target the 148.00 handle.

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