USDJPY Set for Marginal Gains As the Dollar Losses Steam

Summary:
• The US dollar has lost its upside momentum on mixed fundamentals, and falling US Treasury yields could pull USDJPY lower.

The Japanese yen has managed to ease pressure from the US dollar, but is trading in the red for the second consecutive day. USDJPY is going for 150.101, at 13.20 GMT, but a lack of changes in the market fundamentals has constricted it to trade within narrow margins of its 150.00 pivot.  The pair is likely to wait until Wednesday to move outside the current range.

The yen currently lacks a definitive momentum after last week’s coalescing around a potential intervention by the Bank of Japan cooled down. The BoJ seems to have opted to go slow on the intervention after the mixed US economic data neutralized some of the dollar’s strength. The DXY index has been on a four-day downward action, signifying the greenback’s subdued outlook against other major world currencies.

Furthermore, yields on the benchmark 10-year US treasury bonds have fallen below the 4.300% psychological support, and stood at 4.279 at press time. Similarly, 5-year bonds had lost 4 basis points and stood at 4.249%. Therefore, the dollar currently stands on shaky ground. Nonetheless, the USDJPY pair could get fresh impetus when Japan releases her Adjusted Trade Balance data and export figures for the 12-month period to January 2024.

However, the greatest impact on the USDJPY forex market could come from the Federal Open Market Committee (FOMC) January minutes, expected to be released on Wednesday. The minutes will provide more details on the Fed’s interest rate policy, with specific pointers to look out for. Specifically, traders will be keen to find clues on when the next rate cuts could come.

Technical analysis

The RSI on the USDJPY 30-minute chart shows that the pair lacks downward momentum. This will favour the establishment of a pivot at 150.10, from which you should watch out for upside action to the first resistance at 150.45.  If the buyers sustain the momentum, the pair could breach that level to test 150.60. However, a break below the pivot will likely bring the exchange rate to 149.95, with possible movement further down to 149.85.