Japanese Yen languishes near YTD low against USD, seems vulnerable to slide further

• The Japanese Yen continues losing ground for the third successive day on Wednesday.
• The uncertainty over the BoJ’s future policy steps continues to undermine the JPY.
• A modest USD uptick lends additional support to USD/JPY and favours bullish traders.

The Japanese Yen (JPY) drifts lower for the third straight day on Wednesday and drops back closer to its lowest level since November 2023 touched against its American counterpart last week. Despite raising interest rates for the first time since 2007, the Bank of Japan (BoJ) struck a dovish tone at the end of the March policy meeting and stopped short of offering any guidance about future policy steps, or the pace of policy normalization. This, in turn, keeps the JPY bulls on the defensive, though verbal interventions from Japanese authorities help limit any further losses.

The US Dollar (USD), on the other hand, continues to draw support from the optimistic outlook for the US economy and doubts whether the Federal Reserve (Fed) will cut interest rates three times this year as projected amid still-sticky inflation. This, in turn, is seen as another factor lending support to the USD/JPY pair and support prospects for further gains. Traders, however, might prefer to wait for the release of the US Personal Consumption and Expenditure (PCE) Price Index on Friday for more cues about the Fed's policy path and before placing fresh directional bets.

Daily Digest Market Movers: Japanese Yen remains depressed amid the divergent BoJ-Fed expectations

• The Bank of Japan indicated that it intends to maintain an accommodative monetary policy for an extended period at the end of the March meeting, which continues to undermine the Japanese Yen.
• The view was echoed by BoJ Board Member Tamura Naoki on Wednesday, who added that the bank will guide monetary policy appropriately in accordance with economic, price, and financial developments.
• Japan’s finance minister said on Tuesday that he would not rule out any measures to cope with the weakening currency and that excessive volatility is creating adverse conditions for business operations.
• Japan's top currency diplomat Masato Kanda said that the current JPY weakness does not reflect fundamentals and labelled the recent moves as speculative, showing readiness to respond to volatility.
• The US Dollar adds to the previous day's modest gains that followed the release of the upbeat Durable Goods Orders data, which registered a growth of 1.4%, slightly more than expected in February.
• Separately, the Conference Board reported that the US Consumer Confidence Index dipped to 104.7 in March, little changed from the previous month's reading of 104.8 amid fading fears of a recession.
• Furthermore, consumers' inflation expectations ticked up to 5.3% during the reported month from 5.2% in February, which might force the Federal Reserve to keep interest rates higher for longer.
• Traders, however, seem reluctant to place aggressive direction bets and prefer to wait for the release of the crucial US Personal Consumption and Expenditure (PCE) Price Index data on Friday.

Technical Analysis: USD/JPY bulls retain control, could aim to challenge the multi-decade high near the 152.00 mark

From a technical perspective, some follow-through buying, leading to a move beyond the YTD peak and the 152.00 mark, will be seen as a fresh trigger for bullish traders. Given that oscillators on the daily chart are holding comfortably in the positive territory, the USD/JPY pair might then prolong its well-established uptrend witnessed since January 2023 and climb further towards the 153.00 round figure.

Meanwhile, any corrective decline might now be seen as a buying opportunity and remain limited near the 151.00 mark. A convincing break below, however, might expose the next relevant support near the 150.25 region. This is closely followed by the 150.00 psychological mark, which if broken decisively could make the USD/JPY pair vulnerable to accelerate the corrective decline further towards the 149.35-149.30 region en route to the 149.00 mark.