Japanese Yen climbs to multi-week top against USD amid hawkish BoJ talks

• The Japanese Yen attracts follow-through buying amid renewed BoJ rate hike bets.
• The uncertainty about the Fed’s rate-cut path keeps the USD bulls on the defensive.
• The market focus remains glued to the release of the crucial US NFP report on Friday.

The Japanese Yen (JPY) scales higher against its American counterpart for the third straight day and jumps to a nearly four-week high during the Asian session on Thursday. Data released earlier this week showed that the Consumer Price Index (CPI) in Tokyo – Japan's capital city – rebounded from a 22-month low and moved back above the Bank of Japan's (BoJ) 2% target in February. This, along with speculations that the ongoing annual wage negotiations will yield bumper pay hikes for the second year in a row and fuel demand-driven inflation, lifts bets for an imminent shift in the BoJ's policy stance and underpins the JPY.

Bulls, meanwhile, seem rather unaffected by reports that the BoJ could revise down its assessment on consumption and factory output this month amid signs of weakness in the economy that underscore the fragile state of its recovery. Moreover, real wages in Japan shrank in January for the 22nd consecutive month, albeit doing little to dent the bullish sentiment surrounding the JPY. The US Dollar (USD), on the other hand, languishes near its lowest level since early February amid the uncertainty about the Federal Reserve's (Fed) rate cut path. This further contributes to the USD/JPY pair's decline further below the 149.00 mark.

Daily Digest Market Movers: Japanese Yen is underpinned by hawkish BoJ talks

• A rise in Tokyo inflation revives bets that the Bank of Japan will pivot away from its ultra-easy monetary policy settings as soon as this month and continues to underpin the Japanese Yen.
• The Jiji News Agency reported on Wednesday that BoJ might consider ending negative interest rates amid expectations that this year's pay negotiations will yield solid results to boost consumption.
• Data released on Thursday showed that real wages for Japanese workers shrank in January for the 22nd straight month, albeit at the slowest pace in over a year on weakening price pressures.
• BoJ policymaker Junko Nakagawa noted that the central bank is gathering information to make policy decisions while Japan's economy makes steady progress toward the achievement of the price target.
• Federal Reserve Chair Jerome Powell told US lawmakers on Wednesday that the central bank will cut interest rates this year, though wants to see more evidence that inflation is falling to the 2% target.
• Minneapolis Fed President Neel Kashkari said that he had pencilled in two interest-rate cuts in 2024 and added that he may reduce the number of cuts in the wake of the incoming stronger macro data.
• The Automatic Data Processing (ADP) reported that private-sector employment in the US rose by 140K in February, less than the 150K expected, while wages increased at the slowest pace in 2-1/2 years.
• The data points to signs of a cooling labor market and keep the path open for Fed rate cuts later this year, which continues to undermine the US Dollar and further exerts pressure on the USD/JPY pair.
• Traders now look to Powell's second day of testimony before the Senate Banking Committee, which, along with the US Weekly Initial Jobless Claims and Trade Balance data, could provide some impetus.
• The focus, however, will remain glued to the release of the closely-watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday.

Technical Analysis: USD/JPY slides closer to 23.6% Fibo. level of December-February rally

From a technical perspective, the recent repeated failures ahead of the 151.00 mark, or the YTD peak, and the subsequent fall favours bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction and support prospects for a further near-term depreciating move. Some follow-through selling below the 23.6% Fibonacci retracement level of the December-February rally, around the 148.40-148.35 region, will reaffirm the bearish setup and drag the USD/JPY pair to the 148.00 mark. This is closely followed by the 100-day Simple Moving Average (SMA), currently around the 147.80 zone, which if broken decisively will expose the 38.2% Fibo. level, near the 146.80 area, with some intermediate support near the 147.00 round figure.

On the flip side, the 149.00 mark might now act as an immediate strong barrier. Any further move up is more likely to attract fresh sellers and remain capped near the 149.70 horizontal support breakpoint, now turned resistance. That said, some follow-through buying, leading to a subsequent strength beyond the 150.00 psychological mark, will suggest that the recent corrective slide from the YTD peak has run its course and shift the bias in favour of bullish traders. The USD/JPY pair might then surpass the 150.40-150.50 hurdle and make a fresh attempt to conquer the 151.00 round-figure mark.