- Safe-haven demand for JGBs has driven the 10-year rate down to 0.24%.
- Investors are expecting a Fed pause amid the collapse of US banks.
- Japanese policymakers dismissed the chance that the failure of SVB would affect Japan.
Today’s USD/JPY price analysis is slightly bullish. The dollar remained close to a multi-week low as traders speculated that the Federal Reserve would suspend its aggressive rate-hiking cycle. This is due to concerns of a wider systemic crisis resulting from the failure of a US bank.
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However, the yen fell as analysts believe the BOJ may not feel compelled to change the YCC policy, given that safe-haven demand for JGBs has driven the 10-year rate down to 0.24%.
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The market turmoil coincides with a change in leadership at the Bank of Japan (BOJ). Investors are waiting to see when Kazuo Ueda, the new governor, will begin to reduce the BOJ’s enormous stimulus program.
Several analysts had predicted the BOJ would discontinue or phase out its bond yield curve control policy this year. Increasing inflation and global interest rates have spurred market attacks on a 0.50% cap established for the 10-year Japanese government bond yield.
On Tuesday, Japanese policymakers dismissed the chance that the failure of US lender Silicon Valley Bank would hurt the nation’s economy.
Economy Minister Shigeyuki Goto said the government was closely monitoring any potential effects on Japan’s economy but did not anticipate a significant impact.
Shunichi Suzuki, Japan’s finance minister, reiterated the viewpoint. He stated that he did not believe the collapse of Silicon Valley Bank would significantly impact the country’s financial system.
USD/JPY key events today
All focus will be on US inflation figures. This might influence the Fed’s next move, although markets have reduced rate hike expectations for March.
USD/JPY technical price analysis: Pullback facing 134.00 key level
The 4-hour chart shows USD/JPY trading below the 30-SMA, pointing to a bearish move. The RSI is trading below the 50-mark, a sign of strong bearish momentum. The bearish move paused at the 132.55 support, where bulls returned to retrace the recent move.
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They are currently facing the 134.00 resistance. If it holds firm, the price will likely fall and take out the 132.55 support to make a new low in the downtrend. If not, we might see a deeper pullback to the 30-SMA.
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