USD/JPY struggles to defend 114.00 on anxious markets, BOJ minutes

• USD/JPY eases from fortnight top to probe a two-day uptrend.
• Risk appetite sours amid pre-central bank moves, mixed catalysts.
• BOJ minutes confirm policymakers’ readiness to take additional easing measures if covid-led hardships escalate.
• Chatters over monetary policy, inflation remain hot ahead of Wednesday’s Fed decision.

USD/JPY seesaws around 114.00, following a two-day uptrend, amid the initial Tokyo open on Tuesday. The yen pair earlier cheered the US dollar strength before the cautious mood in the market joined the Bank of Japan (BOJ) Minutes to challenge the bulls.

As per the latest BOJ Minutes, shared by Reuters, “Members shared view Japan's economy likely to improve as the impact of pandemic subsides.” “Many members said pent-up demand has yet to materialize in Japan,” adds BOJ Minute statement.

Additionally, Japan’s easing of international entry for students and business, not for tourists, helps the JPY. On the same line were concerns over Prime Minister Fumio Kishida’s spending plan after the surprise victory in the snap election.

It’s worth noting that cautious sentiment during the run-up to the key central bank meetings seems to challenge the USD/JPY of late. On Monday, US PMIs came in softer, suggesting less urgency on the part of the Fed to taper the monthly bond purchases. Additionally, citing the recently easing need for the Fed action were the reduction in the US inflation expectations and comments from US Treasury Secretary Janet Yellen stating, “I don’t think US economy is overheating.” The ex-Fed Boss Yellen hinted that the US-China Phase One trade deal and reciprocal easing of tariffs may tame inflation. The same highlights optimism towards reaching the much-awaited trade agreement among the world’s top two economies.

The mixed concerns join mildly offered S&P 500 Futures, despite upbeat Wall Street close, to probe the USD/JPY buyers. It should be observed that the US 10-year Treasury yields wobble around 1.57% whereas the US Dollar Index (DXY) reverses the previous day’s pullback from a three-week high by the press time.

Moving on, risk appetite may remain sluggish ahead of the Fed and the Bank of England (BOE) monetary policy decisions which are likely to convey the policymakers’ bullish bias. The same should recall the USD/JPY should the greenback cheer the hawkish statements.

Technical analysis

The previous support line from late September guards the short-term upside of the USD/JPY prices around 114.60. However, even short-term sellers may not take risk of entries until the quote stays above the 20-DMA level surrounding 113.55.