Japanese Yen weakens back below 150.00 against USD, bears seem non-committed

• The Japanese Yen stalls a two-day-old recovery trend from the YTD low touched on Tuesday.
• A positive risk tone and the uncertainty about BoJ’s policy shift undermine the safe-haven JPY.
• Reviving bets for an early rate cut by the Fed could weigh on the USD and cap the USD/JPY pair.

The Japanese Yen (JPY) edges lower against its American counterpart during the Asian session on Friday and erodes a part of its recovery gains registered over the past two days, from the YTD low touched earlier this week. The uncertainty about the likely timing of when the Bank of Japan (BoJ) will exit the negative interest rates policy, along with the overnight rally in the US equity markets, turn out to be key factors undermining the safe-haven JPY. This, in turn, assists the USD/JPY pair to move back above the 150.00 psychological mark. That said, verbal intervention by Japanese authorities should limit losses for the JPY and cap the currency pair.

Meanwhile, the weaker US Retail Sales data released on Thursday revived bets that the Federal Reserve (Fed) will soon start cutting interest rates. This might continue to weigh on the US Dollar (USD) and further contribute to keeping a lid on the USD/JPY pair, warranting some caution before positioning for any further intraday appreciating move. Moving ahead, market participants now look to the US economic docket – featuring the release of the Producer Price Index (PPI), Housing Starts and the Preliminary Michigan Consumer Sentiment Index. This, along with speeches by influential FOMC members should provide a fresh impetus.

Daily Digest Market Movers: Japanese Yen is undermined by BoJ policy uncertainty and a positive risk tone

• Reduced bets for an imminent shift in the Bank of Japan's policy stance, along with the risk-on mood, fail to assist the safe-haven Japanese Yen to build on a two-day recovery trend from the YTD low.
• Japan's economy unexpectedly contracted in the fourth quarter on weak domestic demand and slipped into a recession, which might have derailed the BoJ's plan to exit its ultra-easy policy this year.
• Investors turned optimistic after the dismal US macro data released on Thursday pointed to possible signs of weakness in consumer spending and fuelled hopes for an early rate cut by the Federal Reserve.
• The Commerce Department reported that Retail Sales declined sharply by 0.8% in January, more than the 0.1% fall expected, while sales excluding auto contracted by 0.6% during the reported month.
• According to the CME Group's FedWatch Tool, bets for a rate cut of at least 25 basis points in May edged up to 40% and the odds for such a move in June stood at roughly 80% following the data.
• A separate report showed that import prices posted their biggest gain in nearly two years and jumped by 0.8% last month, though declined by 1.3% over the past 12 months through January.
• Meanwhile, the number of Americans who applied for unemployment benefits slid by 8K from 220K in the prior week, to a one-month low of 212K during the week ended February 10.
• The yield on the benchmark 10-year US government bond holds above the 4.0% mark and helps the USD to stall its corrective decline from a multi-month top, providing a modest lift to the USD/JPY pair.
• Investors now look to the US Producer Price Index (PPI), which is expected to ease to the 0.6% YoY rate from 1.0% previously, for fresh cues about the Fed's future policy decision and rate-cut path.
• Friday's US economic docket also features the release of Housing Starts and the Preliminary Michigan Consumer Sentiment Index, which, along with speeches by Fed officials, should provide some impetus.
• Japan's Finance Minister Shunichi Suzuki reiterated on Friday that the government will closely monitor FX moves and it is important for currencies to move in a stable manner, reflecting fundamentals.

Technical Analysis: USD/JPY needs to break through the 151.00 mark for bulls to seize back near-term control

From a technical perspective, any subsequent move up is likely to confront some resistance near the mid-150.00s ahead of the 150.85-150.90 region, or a multi-month top set on Tuesday. Some follow-through buying beyond the 151.00 round figure will be seen as a fresh trigger for bullish traders and pave the way for a further appreciating move. Given that oscillators on the daily chart are holding in the positive territory and are still away from the overbought zone, the USD/JPY pair might then climb to the 151.45 intermediate hurdle. The momentum could extend further towards the 152.00 neighbourhood, or a multi-decade peak set in October 2022 and retested in November 2023.

On the flip side, the overnight swing low, around mid-149.00s, now seems to protect the immediate downside ahead of the 149.25-149.20 area and the 149.00 round figure. The latter should act as a key pivotal point, which if broken decisively will suggest that the USD/JPY pair has formed a near-term top and set the stage for some meaningful corrective decline. The subsequent downfall has the potential to drag spot prices to the 148.35-148.30 region en route to the 148.00 mark and the 100-day Simple Moving Average (SMA) support near the 147.70-147.65 zone.