Japanese Yen remains confined in a one-week-old trading range against USD

• The Japanese Yen benefits from the BoJ’s hawkish tilt on Tuesday, though lacks follow-through.
• Geopolitical tensions and the uncertain global economic outlook underpin the safe-haven JPY.
• Reduced bets for an early rate cut by the Fed lend support to the USD and the USD/JPY pair.

The Japanese Yen (JPY) ticks higher following the previous day's good two-way price swings, albeit lacks bullish conviction and remains confined in a familiar range during the Asian session on Wednesday. The Bank of Japan (BoJ) Governor Kazuo Ueda's comments during the post-meeting press conference suggested that conditions for phasing out huge stimulus and pulling short-term interest rates out of negative territory were falling into place. Apart from this, a larger-than-expected rise in Japan's exports and geopolitical tensions offer some support to the safe-haven JPY.

Meanwhile, the BoJ lowered its forecast for core consumer prices for fiscal 2024, tempering hopes for the need to immediately begin tightening the ultra-loose policy. This, in turn, might hold back the JPY bulls from placing aggressive bets, which, along with the underlying bullish sentiment surrounding the US Dollar (USD), should help limit the downside for the USD/JPY pair. Traders might also prefer to wait on the sidelines ahead of the top-tier US macro data, the Advance Q4 GDP print and the Core PCE Price Index, scheduled for release on Thursday and Friday, respectively.

Daily Digest Market Movers: Japanese Yen draws support from the fact that BoJ opened the door to end negative rates

• The Bank of Japan said on Tuesday that the likelihood of sustainably achieving the 2% inflation target was gradually increasing, laying the groundwork for monetary policy normalisation.
• The head of Japan's biggest business lobby Keidanren called for wage hikes this year that exceed the inflation rate, paving the way for the BoJ to pivot away from its ultra-easy policy.
• The global economic outlook, especially in China and Europe, remains uncertain, which, along with geopolitical tensions, is seen lending some support to the safe-haven Japanese Yen.
• Data released this Wednesday showed that Japan's exports rose 9.8% from a year earlier, with exports to China rising for the first time in 13 months and exports to the US hitting a record higher.
• The au Jibun Bank flash Japan Manufacturing PMI improved slightly to 48.0 in January from December's reading of 47.9, though remained in contraction territory for the eighth straight month.
• Meanwhile, the au Jibun Bank flash Services PMI rose from 51.5 to 52.7 in January, while the Composite PMI advanced to 51.1 during the reported month from 50.0 in December.
• US military forces struck 3 facilities used by Iranian-affiliated militant groups in western Iraq in direct response to a series of escalatory attacks against US forces in the Middle East.
• The US Dollar holds steady near a six-week peak touched on Tuesday amid expectations that the Federal Reserve will be in no hurry to cut rates in the wake of a resilient US economy.
• Traders now look to the release of flash PMI prints from the Eurozone and the US, which will provide a fresh insight into the global economic health and drive demand for the JPY.
• The focus, however, will remain on the Advance US Q4 GDP print and the US Core PCE Price Index – the Fed's preferred inflation gauge – due on Thursday and Friday, respectively.

Technical Analysis: USD/JPY awaits a breakout through the recent trading range before the next leg of a directional move

From a technical perspective, the USD/JPY pair's inability to build on the overnight bounce from sub-147.00 levels warrants some caution for bullish traders. Hence, it will be prudent to wait for some follow-through buying beyond the 148.80 region, or a multi-week top touched last Friday, before positioning for an extension of the recent move-up witnessed since the beginning of this month. Given that oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone, spot prices might then aim to surpass an intermediate hurdle near the 149.30-149.35 zone and reclaim the 150.00 psychological mark for the first time since November 17.

On the flip side, the 100-day Simple Moving Average (SMA), currently around the 147.55 region, now seems to protect the immediate downside ahead of the 147.00 mark, or the overnight swing low. The next relevant support is pegged near the 146.60-146.55 area, below which the USD/JPY pair could weaken further towards the 146.10-146.00 horizontal support. The latter should act as a key pivotal point, which if broken decisively will negate any near-term positive outlook and shift the bias in favour of bearish traders.