Impossible Catalysts

The USD/JPY currency pair reversed the rally at the beginning of Monday. The rally queried a downtrend of two days prior and renewed the intraday low point. It was an eventful spectacle while going into the European session on Monday.


Concluding on that, it seems the Japanese Yen pair had a struggle with many catalysts. It should be noted that the pair recently dropped to 127.00.

USD/JPY price chart. Source TradingView

Part of the catalysts include the indecisiveness of the market and the US bank holiday. The bank holiday put a restriction on moves the pair could have made. While the general weakness of the US Dollar is in contrast with the risk-on mood.

The present situation is troubling to the pair’s traders. But the BOJ’s willingness to implement strong policy easing helps buyers to remain hopeful. The hopes were communicated by the bank’s Governor, Haruhiko Kuroda.

The bank chief stated recently that the BOJ will keep up with its monetary policy. The plan is to aid the economy’s recovery from the slump COVID sent it into. The Japanese PM also said the government believes the BOJ will reach its inflation target.

In the US, eased Treasury yields are weighing heavily on the price of USD/JPY. Ditto for the declining bets on the Fed’s implementation of an aggressive rate increase. This is majorly a result of the most recent inflation and growth numbers published.

Furthermore, the risk-on impulse from China, as well as news about COVID, shows activity restrictions. This development was, however, favorable to the buyers of the pair since it’s a risk barometer.

The S&P 500 futures showed the market mood as it renewed a high point of three weeks. The S&P 500 benchmark shared its largest gain on a weekly basis in about 18 months.

Going forward, traders of the USD/JPY pair are looking for decisive direction from US yields. They also seek the same from various risk catalysts. This, then, puts emphasis on the employment report from Japan.

It also puts emphasis on other qualitative catalysts regarding COVID, China, and Ukraine. The ongoing war in Ukraine has pressed the macroeconomy heavily for months. The sanctions against Russia have turned out to cripple Europe itself.

Technical Perspective

The 50-period daily moving average might defend buyers of USD/JPY close to 126.70. But a downtrend from 9th May, close to 127.60, is restricting the near-term increase for the pair.

The possibility of the pair testing the 126.00 area in the coming weeks is low. This is according to the latest analysis by financial experts.

On Friday, the US Dollar traded in a low manner within the range of 126.66 and 127.25. It finally closed almost without a change at 127.11. It is likely that the movement is part of a consolidatory phase.

The US Dollar might trade sideways despite the underlying tone indicating another range at 126.70-127.30.