The Japanese Yen attracts some haven flows in the wake of rising geopolitical tensions.

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• The Japanese Yen attracts some haven flows in the wake of rising geopolitical tensions.
• Bets that the BoJ will stick to its dovish stance on Tuesday might cap any further gains.
• Diminishing odds for more aggressive Fed policy easing should lend support to USD/JPY.

The Japanese Yen (JPY) kicks off the new week on a positive note and recovers further from its lowest level since November 28 touched on Friday against the US Dollar (USD). Traders, however, might refrain from placing aggressive directional bets and prefer to wait on the sidelines ahead of the highly-anticipated Bank of Japan (BoJ) policy decision on Tuesday. Heading into the key central bank event risk, growing acceptance that the Japanese central bank will show little desire towards ending negative rates or tweaking the Yield Curve Control (YCC) policy might continue to undermine the JPY. Apart from this, a generally positive tone around the equity markets could further dent the JPY’s relative safe-haven status.

The USD, on the other hand, is likely to draw support from reduced bets for an early rate cut by the Federal Reserve (Fed) and the upbeat US consumer sentiment data released on Friday. This, along with the upbeat US Retail Sales figures and a solid labor market report, indicated that the economy remained in good shape. Adding to this, hawkish remarks by influential Fed officials forced investors to further scale back their expectations for a more aggressive Fed policy easing in 2024. This remains supportive of elevated US Treasury bond yields and acts as a tailwind for the buck. Apart from this, the recent widening of the US-Japan rate differential suggests that the path of least resistance for the USD/JPY pair is to the upside.

From a technical perspective, any subsequent downfall is more likely to find decent support near the 100-day Simple Moving Average (SMA), currently pegged near mid-147.00s. The said area could act as a pivotal point, which if broken decisively might prompt aggressive technical selling and drag the USD/JPY pair towards the 147.00 mark en route to the next relevant support near the 146.60-146.55 area.

On the flip side, the 148.00 round figure, followed by the 148.15-20 region now seems to act as an immediate hurdle ahead of the multi-week high, around the 148.80 zone touched on Friday. Some follow-through buying, leading to a subsequent strength beyond the 149.00 mark, will be seen as a fresh trigger for bullish traders. The USD/JPY pair might then aim to conquer the 150.00 psychological mark with some intermediate hurdle near the 149.70-149.75 area.

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