USD/JPY establishes above 148.00 as risk-off mood returns, BOJ policy hogs limelight

• USD/JPY has shifted its auction profile above 148.00 as the risk aversion theme has been underpinned.
• S&P500 futures have tumbled more than 1% on a decline in Microsoft’s sales growth forecasts.
• The BOJ may continue its ultra-dovish path to keep the economic prospects active.

The USD/JPY pair has comfortably shifted its business above the critical hurdle of 148.00 in the Asian session. The asset has witnessed a fresh demand at around 148.00 as the risk-off impulse has returned.

Investors’ risk appetite has been trimmed which has resulted in a steep fall in S&P500 futures. The 500-stock futures basket has tumbled 1.15% after a three-day buying spree as Microsoft (MSFT) has trimmed its sales growth forecast by 5%. Meanwhile, the US dollar index (DXY) has reclaimed the round-level hurdle of 111.00 amid an improvement in safe-haven’s appeal.

The alpha on US Treasury has recovered minutely but is still in a bearish trajectory. The 10-year US Treasury yields are hovering around 4.10% after rebounding from 4.05%.

On Wednesday, the US New Home Sales data will hog the limelight. The economic data is expected to decline to 0.585M vs. the prior release of 0.685M on a monthly basis. As interest rates are accelerating sharply, individuals have postponed their real estate demand due to higher interest obligations. However, the US Gross Domestic Product (GDP) data will remain the ultimate trigger for the mighty DXY. The annualized GDP is expected to improve significantly to 2.4% vs. a decline of 0.6% reported earlier.

It is worth noting that the responsiveness of a decline in the USD/JPY pair was observed lower than the decline in the DXY on Tuesday after the risk-on impulse heated. Therefore, a rebound move in the USD/JPY pair could be firmer than the DXY as the risk aversion theme is knocking markets.

On the Tokyo front, investors seek more clarity on the stealth intervention in the currency markets by the Bank of Japan (BOJ) to make informed positions. Along with that, Friday’s interest rate decision by the BOJ will keep the anxiety at best. Most likely, BOJ Governor Haruhiko Kuroda will leave the interest rates unchanged and will continue its dovish tone amid weaker demand.