USDJPY:
The Japanese Yen (JPY) failed to capitalize on modest gains in Monday’s Asian session and hit a three-week low against its US counterpart in the final hour. The initial reaction to better-than-expected data on Core Machinery Orders and flash PMI for Japan’s manufacturing sector was short-lived amid strengthened expectations that the Bank of Japan (BoJ) will not raise interest rates later this week. In addition, bets that the Federal Reserve (Fed) will be less dovish continue to support rising US Treasury yields and prove to be another factor undermining the low-yielding Japanese Yen.
However, lingering geopolitical risks related to the protracted war between Russia and Ukraine and ongoing conflicts in the Middle East, as well as concerns over US President-elect Donald Trump’s tariff plans may limit losses for the safe-haven Yen. Traders may also refrain from aggressive directional bets and await key central bank events this week with interest. The Fed is due to announce its decision at the end of its two-day meeting on Wednesday, which will be followed by the crucial Bank of Japan meeting on Thursday and will help determine the next stage of directional movement for the JPY.
Trading recommendation: Trade predominantly with Buy orders from the current price level.
Origin: FreshForex
