The Japanese Yen edges lower against the USD on Thursday, albeit lacks follow-through selling.

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• The Japanese Yen edges lower against the USD on Thursday, albeit lacks follow-through selling.
• The risk-on mood and the recent widening of the US-Japan rate differential, undermine the JPY.
• Delayed Fed rate cut bets remain supportive of elevated US bond yields and favour the USD bulls.
• Traders now look to the US GDP ahead of the key inflation data from Japan and the US on Friday.

The Japanese Yen (JPY) recorded strong gains on Wednesday and strengthened to over a one-week high against its American counterpart in the wake of the Bank of Japan’s (BoJ) hawkish tilt. Bulls, however, struggle to capitalize on the momentum amid the underlying bullish sentiment across the global equity markets, which tends to undermine the JPY’s relative safe-haven status. Apart from this, the recent widening of the US-Japan rate differential, bolstered by expectations that the Federal Reserve (Fed) will not rush to cut interest rates, turns out to be another factor acting as a headwind for the JPY.

That said, the Bank of Japan’s (BoJ) hawkish tilt earlier this week, suggesting that conditions for phasing out huge stimulus and pulling short-term interest rates out of negative territory were falling into place, should limit losses for the JPY. Traders might also refrain from placing aggressive directional bets ahead of important US macro releases – the Advance Q4 GDP print and the Personal Consumption Expenditures (PCE) Price Index, due on Thursday and Friday, respectively. This warrants caution for the JPY bears and keeps the USD/JPY pair confined in a familiar trading range held over the past week or so.

From a technical perspective, this week’s repeated failures to find acceptance below the 100-day Simple Moving Average (SMA) and the subsequent rebounds suggest that the path of least resistance for the USD/JPY pair is to the upside. That said, any further move up is likely to confront some resistance near the 148.00 round figure ahead of the 148.20-148.25 region. The next relevant hurdle is pegged near the 148.80 region, or a multi-week high touched last Friday, which if cleared will be seen as a fresh trigger for bullish traders. Given that oscillators on the daily chart are holding comfortably in the positive territory, spot prices might then aim to surpass an intermediate hurdle near the 149.30-149.35 zone and reclaim the 150.00 psychological mark.

On the flip side, weakness below the 100-day SMA, currently around the 147.55 region, might continue to attract some buyers near the 147.00 mark. This should help limit the downside for the USD/JPY pair near the 146.45 zone, or the weekly trough touched the previous day. Some follow-through selling, however, will negate the positive bias and shift the near-term bias in favour of bearish traders, paving the way for a slide towards testing the 146.10-146.00 horizontal support. The downward trajectory could extend further towards the 145.30-145.25 intermediate support en route to the 145.00 psychological mark.

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