The Japanese Yen remains close to over a two-week high touched against the USD on Thursday.

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• The Japanese Yen remains close to over a two-week high touched against the USD on Thursday.
• The BoJ’s hawkish tilt, along with geopolitical tensions, continue to underpin the safe-haven JPY.
• Expectations for an imminent shift in the Fed’s policy stance keep the USD bulls on the defensive.
• Investors opt to move to the sidelines and look to the US jobs report (NFP) for a fresh impetus.

The Japanese Yen (JPY) enters a bullish consolidation phase during the Asian session on Friday and oscillates in a narrow range just below a two-and-half-week high touched against its American counterpart the previous day. Traders now seem reluctant to place aggressive directional bets and opt to wait for the release of the closely-watched US monthly employment data, popularly known as the Nonfarm Payroll (NFP) report later today. The downside for the JPY, meanwhile, remains cushioned in the wake of the Bank of Japan’s (BoJ) hawkish tilt last week. This, along with the risk of a further escalation of geopolitical tensions in the Middle East and China’s economic woes, might continue to underpin the safe-haven JPY.

Meanwhile, investors, despite the Federal Reserve’s (Fed) less dovish outlook on Wednesday, continue to bet on a steep series of rate cuts this year. This led to the recent decline in the US Treasury bond yields, resulting in the narrowing of the US-Japan rate differential and further benefitting the JPY. Moreover, expectations for an imminent shift in the Fed’s policy stance prompted the US Dollar (USD) bulls to lighten their bets, especially after the recent runup to the highest level since December 13. This, in turn, might contribute to capping any meaningful recovery for the USD/JPY pair heading into the key US data risk. Nevertheless, the divergent BoJ-Fed policy expectations suggest that the path of least resistance for spot prices is to the downside.

From a technical perspective, the overnight breakdown through the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 23.6% Fibonacci retracement level of the December-January favour bearish traders. Moreover, oscillators on the said chart are holding deep in the negative territory and have been losing positive traction on the daily chart. That said, it will still be prudent to wait for acceptance below the 146.00 mark before positioning for deeper losses. The USD/JPY pair might then accelerate the fall towards the 38.2% Fibo. level, around the 145.55 region, before eventually dropping to the 145.00 psychological mark, representing the 200-period SMA on the 4-hour chart.

On the flip side, the 146.75 area now seems to act as an immediate hurdle ahead of the 147.00 mark and the 147.15 area, or the 100-period SMA on the 4-hour chart. A sustained strength beyond the said barriers might shift the bias back in favour of bulls and set the stage for the resumption of the uptrend witnessed since the beginning of this year. The subsequent move up has the potential to lift the USD/JPY pair further towards the 148.00 mark en route to the 148.75-148.80 double-top resistance, or the YTD peak touched in January.

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