Japanese Yen drops to fresh YTD low against USD, bears seem non-committed

• The Japanese Yen is weighed down by the risk-on mood, though the BoJ’s hawkish tilt limits losses.
• Geopolitical tensions and China’s economic woes could also act as a tailwind for the safe-haven JPY.
• The post-NFP USD buying remains unabated and continues to lend some support to the USD/JPY pair.

The Japanese Yen (JPY) remains under some selling pressure for the second successive day on Monday and slides to a fresh YTD low against its American counterpart during the Asian session. Despite the Bank of Japan's (BoJ) hawkish tilt earlier this month, an extension of the recent bullish run across the global equity markets is seen as a key factor undermining the JPY's relative safe-haven status. Furthermore, the blockbuster US jobs data released on Friday provided evidence that the economy is still in good shape, which should allow the Federal Reserve (Fed) to keep interest rates higher for longer. This lifts the US Dollar (USD) to its highest level since December 11 and lends additional support to the USD/JPY pair.

The JPY bulls, meanwhile, seem rather unimpressed by an upward revision of the Japan Services PMI for January, though bets for an imminent shift in the BoJ's policy stance should help limit deeper losses. Apart from this, persistent worries about a further escalation of geopolitical tensions in the Middle East and China's economic woes could also act as a tailwind for the JPY. Traders now look to the release of the US ISM Services PMI for some impetus later during the early North American session, which, along with the US bond yields, will drive the USD demand. Furthermore, the broader risk sentiment should contribute to producing short-term trading opportunities around the USD/JPY pair on the first day of a new week.

Daily Digest Market Movers: Japanese Yen is undermined by a combination of factors, though it lacks follow-through selling

• China's pledge to stabilise markets comes on top of the upbeat US employment details on Friday, which pointed to a resilient economy, and boosts investors' confidence, undermining the safe-haven Japanese Yen.
• China Securities Regulatory Commission said on Sunday that it would guide more medium- and long-term funds into the market and crack down on illegal activities including malicious short selling and insider trading.
• The headline NFP showed that the US economy added 353K jobs in January, smashing market expectations for 180K, and the previous month's reading was also revised higher to 333K from 216K reported initially.
• Other details revealed that the Unemployment Rate held steady at 3.7% and wage inflation, as measured by the change in Average Hourly Earnings, rose to 4.5% on a yearly basis as against the 4.1% rise anticipated.
• The data dimmed hopes for a near-term rate cut by the Federal Reserve, with the probability of such a move at the May FOMC meeting now standing at about 70%, down from 90% before the crucial jobs report.
• Expectations that the Fed will keep interest rates higher for longer continue to push the US Treasury bond yields higher, lifting the US Dollar to a near two-month top and lending support to the USD/JPY pair.
• A survey on Monday showed that business activity in Japan's services sector, which accounts for around 70% of the country's gross domestic product (GDP), expanded at the strongest pace since September.
• In fact, the au Jibun Bank Service PMI was revised up and finalized at 53.1 for January, marking the 17th consecutive month of growth, as against the flash reading of 52.7 and 51.5 in the previous month.
• The Bank of Japan has become more bullish on its inflation outlook due to rising momentum for wage increases and growth in service sector prices, strengthening the case for an imminent exit from negative interest rates.
• Media reports suggest that Hamas is set to reject the Gaza ceasefire deal proposed in Paris and Israel's Prime Minister Benjamin Netanyahu said that the country will not end the war before it completes all of its goals.
• The US ISM Services PMI is due for release later today and is expected to improve from 50.6 to 52.0 in January, which, along with the US bond yields and the broader risk sentiment, should provide some impetus.

Technical Analysis: USD/JPY bulls now await a sustained strength and acceptance above the 148.75-148.80 multiple-top hurdle

From a technical perspective, the USD/JPY pair needs to make it through the 148.75-148.80 multiple-tops resistance for bulls to seize near-term control. Given that oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone, some follow-through buying beyond the 149.00 round figure will be seen as a fresh trigger for spot prices. The subsequent move up should allow bulls to aim back to reclaim the 150.00 psychological mark with some intermediate resistance near the 149.60-149.70 region.

On the flip side, the 148.00 mark now seems to protect the immediate downside. Any further decline is more likely to attract fresh buyers and remain limited near the 100-day Simple Moving Average (SMA), currently pegged near the 147.60-147.55 zone. A convincing break below the latter, however, might prompt aggressive technical selling and drag the USD/JPY pair below the 147.00 mark, towards the next relevant support near the 146.75-146.70 region. The downfall could extend further towards the 146.40 zone en route to sub-146.00 levels, or last week's swing low.