Japanese Yen languishes near YTD low against USD, bearish potential seems intact

• The Japanese Yen continues to be undermined by dovish BoJ remarks on Thursday.
• The Fed rate cut uncertainty keeps the USD bulls on the defensive and caps gains.
• Traders also prefer to wait for the US consumer inflation figures, due next week.

The Japanese Yen (JPY) is seen oscillating in a narrow range against its American counterpart during the Asian session on Friday and consolidating the previous day's heavy losses to a fresh YTD low. The Bank of Japan (BoJ) Deputy Governor Shinichi Uchida said on Thursday that aggressive tightening is unlikely even after an exit from negative interest rate policy. This, along with the recent bullish run in the equity markets, continues to underpin the safe-haven JPY. The US Dollar (USD), on the other hand, stands tall near its highest level in almost three months touched earlier this week and turns out to be another factor acting as a tailwind for the USD/JPY pair.

That said, the uncertainty over the Federal Reserve’s (Fed) rate cut path is holding back the USD bulls from placing aggressive bets. Furthermore, expectations that big Japanese firms could offer sizable wage increases this year will support sustained and stable inflation, allowing the BoJ to pivot away from its ultra-dovish monetary policy settings, and should help limit losses for the JPY. Traders might also prefer to wait for next week's release of the latest US consumer inflation figures for cues about the Fed's future policy decisions, which will play a key role in influencing the near-term USD price dynamics and determining the next leg of a directional move for the USD/JPY pair.

Daily Digest Market Movers: Japanese Yen under pressure after Uchida's dovish remarks

• The Japanese Yen witnessed aggressive selling on Thursday and tumbled to a fresh YTD low against the US Dollar in reaction to Bank of Japan Deputy Governor Shinichi Uchida's dovish remarks.
• In a press release, Uchida signalled a gradual move away from the current negative interest rate environment and said that the BoJ is not looking to make any drastic moves in the near future.
• Chief Cabinet Secretary Yoshimasa Hayashi said this Friday that it is up to the BoJ to decide monetary policy details and Uchida's comments were the same as Governor Ueda made at the last meeting.
• Japanese Finance Minister Shunichi Suzuki said that specific monetary policy is up to the BoJ to decide and that it is important for currencies to move in a stable manner, reflecting fundamentals.
• Robust US macro data, along with the recent hawkish comments by several Federal Reserve officials, forced investors to scale back their expectations for early and steep interest rate cuts this year.
• Richmond Fed Thomas Barkin said on Thursday that the central bank has time to be patient on rate changes and that he needs to see good inflation numbers being sustained and broadening.
• Barkin further added that the labour market remains vibrant and it is hard to determine the appropriate course of action for rates based solely on economic models.
• The yield on the benchmark 10-year US government bond holds comfortably above 4.0%, though does little to impress the US Dollar bulls or provide any meaningful impetus to the USD/JPY pair.
• Traders now seem reluctant to place aggressive bets and prefer to wait for the release of next week's US consumer inflation figures for fresh cues about the Fed's future policy decision.

Technical Analysis: USD/JPY seems poised to reclaim the 150.00 mark and appreciate further

From a technical perspective, the overnight breakout through the 148.80 horizontal barrier was seen as a fresh trigger for bullish traders and might have already set the stage for additional gains. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and are still away from being in the overbought zone. This further validates the constructive set-up and suggests that the path of least resistance for the USD/JPY pair is to the upside. Hence, a subsequent strength towards reclaiming the 150.00 psychological mark, for the first time since November 17, looks like a distinct possibility. Some follow-through buying should pave the way for an extension of the recent uptrend witnessed since the beginning of this year.

On the flip side, any meaningful corrective decline now seems to find decent support near the 149.00 mark ahead of the 148.80 strong resistance breakpoint. The latter should act as a key pivotal point, which if broken decisively might prompt some technical selling and drag the USD/JPY pair back to the 148.00 round figure. The downward trajectory could get extended further towards testing the 100-day Simple Moving Average (SMA), around the 147.60 region. Failure to defend the latter will negate the positive outlook and shift the near-term bias in favour of bearish traders.