The Dollar to Yen (USD/JPY) has faced difficulties in continuing its moderate gains from last night, trading within the price range of 149.85-149.80 and moving in a narrow trading range during the Asian session on Friday.

Currently, the spot price is slightly below the 150.00 level, showing little change today. This is due to cautious trader sentiment, with reluctance to take on significant risks amid uncertainty regarding Federal Reserve (Fed) interest rate policies.

The U.S. central bank decided not to change interest rates last night, maintaining the highest level in 22 years for the second consecutive time. Nevertheless, they acknowledge the need for further rate increases due to unexpected economic conditions in the U.S.

However, Fed Chairman Jerome Powell, in a press conference after the meeting, indicated that financial conditions might already be sufficiently tight to control inflation. This has sparked speculation that the Fed may have finished raising rates and could even cut rates by June of next year.

Additionally, the sharp decline in U.S. Treasury yields recently has kept the U.S. dollar defensive, acting as a barrier for the USD/JPY pair.

Moreover, the Japanese government's efforts to curb the depreciation of its domestic currency have also limited spot price increases. Market participants are choosing to remain sidelined and wait for the highly anticipated U.S. non-farm payrolls (NFP) report, set to be released at the beginning of the North American session.

Despite this, the potential for a decline in the USD/JPY pair appears limited after the Bank of Japan (BoJ) adopted a dovish stance. The BoJ has committed to continuing its accommodative policies to support the domestic economy and sustainably achieve its 2% inflation target.

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Additionally, the minor adjustments made by the Bank of Japan (BoJ) to its Yield Curve Control (YCC) policy indicate a gradual move away from the accommodative measures that have been in place for over a decade.

This, along with a risk-on environment, could weaken the Japanese yen as a safe-haven currency and provide support for the USD/JPY pair. However, the spot price seems poised to register moderate weekly gains, and with the fundamental backdrop outlined above, bearish traders should exercise caution.

Therefore, it may be wiser to wait for strong selling signals before concluding that this pair has reached a short-term peak around the 151.70 price range, or the highs since October 2022, achieved on Tuesday.


Warning!

This analysis is based on insights from fundamental and technical perspectives from trusted sources and does not constitute advice or recommendations. Always remember that this content aims to enrich readers' information. Always conduct independent research regarding other forex information as a reference for your trading decisions.

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