The Japanese Yen remains on the defensive amid the BoJ policy uncertainty.

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• The Japanese Yen remains on the defensive amid the BoJ policy uncertainty.
• The flash Japan PMIs do little to impress the JPY bulls or lend any support.
• Intervention fears help limit deeper losses amid subdued USD price action.

The Japanese Yen (JPY) remains on the defensive against its American counterpart for the second straight day on Thursday and hovers near the weekly low during the Asian session, though lacks follow-through selling. The Japanese economy unexpectedly contracted for the second straight quarter during the October-December period and confirmed a technical recession. This now seems to have dashed hopes for an imminent shift in the Bank of Japan’s (BoJ) policy shift in the coming months. Apart from this, the disappointing release of the flash Japan Manufacturing PMI for February turns out to be a key factor undermining the domestic currency and acts as a tailwind for the USD/JPY pair.

That said, fears that the recent weakness below the 150.00 psychological mark might prompt some intervention from Japanese authorities hold back traders from placing aggressive bearish bets around the JPY. Furthermore, the lack of any meaningful buying around the US Dollar (USD), despite hawkish-sounding FOMC meeting minutes released on Wednesday, contributes to capping the upside for the USD/JPY pair. Moving ahead, traders now look to the US economic docket – featuring the usual Weekly Initial Jobless Claims, the flash PMI prints and Existing Home Sales data. This, along with Federal Reserve Governor Philip Jefferson’s speech, might provide some impetus.

From a technical perspective, the range-bound price action witnessed over the past week or so constitutes the formation of a rectangle on short-term charts. Against the backdrop of the recent breakout through the 148.70-148.80 horizontal barrier, this might still be categorized as a bullish consolidation phase. Moreover, oscillators on the daily chart are holding in the positive territory and are still away from the overbought zone, validating the constructive outlook for the USD/JPY pair. It, however, will still be prudent to wait for some follow-through buying beyond the 150.85-150.90 region, or a multi-month top set last week, before positioning for any further gains. Spot prices might then climb to the 151.45 intermediate hurdle en route to the 152.00 neighbourhood, or a multi-decade peak set in October 2022 and retested in November 2023.

On the flip side, the 150.00 psychological mark now seems to protect the immediate downside ahead of the weekly trough, around the 149.70-149.65 region. Any further weakness could attract some buyers near the 149.25-149.20 area. This is followed by the 149.00 round figure and the 148.80-148.70 resistance-turned-support, which if broken decisively will suggest that the USD/JPY pair has formed a near-term top and set the stage for some meaningful corrective decline. The subsequent downfall has the potential to drag spot prices to the 148.35-148.30 region en route to the 148.00 mark and the 100-day Simple Moving Average (SMA) support near the 147.70 zone.

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