USD/JPY REMAINS HEAVILY BEARISH,LOWEST LEVEL SINCE FEBRUARY 10

24 Mac 2023

For the third consecutive day, USD/JPY is experiencing heavy selling pressure, pushing the pair lower. The anticipation of a hawkish shift by the Bank of Japan (BoJ) is increasing demand for the Japanese Yen, thus contributing to the downward trend. However, some follow-through USD buying may offer some support to the pair, helping to limit further losses.

During the first half of the European session on Friday, the USD/JPY pair extended its rejection slide from the 133.00 level earlier this week, and the spot prices dropped to their lowest point since February 10th. The bears are now looking to push the pair further below the psychological level of 130.00.

Japan's consumer prices rose at their fastest pace since 1982 in February, and the Japanese Yen strengthened across the board in response to the domestic data. Specifically, Japan's core-core CPI, which excludes energy and food prices but includes alcoholic beverages, accelerated to 3.5% YoY, marking the fastest increase in 41 years. This has increased the likelihood of the Bank of Japan adjusting its bond yield control policy in the near future, which would benefit the domestic currency and continue to push the USD/JPY pair lower.

Bearish traders have also taken cues from a further decline in US Treasury bond yields. This decrease in yields is led by the Federal Reserve signaling that it may soon pause its rate-hiking cycle due to the recent banking sector turmoil. As a result, the yield on the benchmark 10-year US government bond and the rate-sensitive two-year Treasury note are hovering near a six-month low reached earlier this week. This further narrows the US-Japan rate differential, which is another factor driving flows towards the JPY and contributing to the heavily offered tone surrounding the USD/JPY pair.