The Japanese Yen was unable to catch any respite during the early European session on Thursday. It found it hard to make a headway vs. the US Dollar maintaining a generally offered tone. The dollar-yen cross remained firm, staying above 143.00. This resilience was due to a modest strength in the US Dollar and increasing expectations of potential BoJ tightening, described in more detail below.
As market participants grapple with the impact of recent developments, USDJPY downside seems limited but JPY performance overall is still very weak. The recent optimism surrounding trade agreements between the United States and Canada, along with a similar sentiment between the EU and the US, has provided some support for the US Dollar. This backdrop, in turn, has underpinned the USD/JPY pair. As a result, it is well positioned to retain its advances above this key level of 143.00.
The US Dollar gained slightly. In particular, this boost was the biggest factor in strengthening the USD/JPY pair’s incredible streak. Market participants are repositioning their strategies ahead of the upcoming release of critical Non-Farm Payroll (NFP) data from the United States on Friday. This data is expected to provide further insight into the health of the US labor market and could influence future monetary policy decisions.
Encouragingly, the markets are in a positive mood with currency pairs such as GBP/USD remaining well supported above 1.3550. Upside for the Japanese Yen is hard to come by. The Yen apparently shows net small short Yen positions. This support lacks the depth required to result in any meaningful counter USD gains.
The Japanese Yen’s actions are even greater affected by rumors about any possible rate raises by the Bank of Japan. As traders continue to focus on all these variables, they’re on the defensive about where the Yen is headed next. Tight external market conditions coupled with challenging internal economic conditions creates an increasingly difficult environment within which to trade currency.