The Japanese Yen stalls a two-day-old recovery trend from the YTD low touched on Tuesday.

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• The Japanese Yen stalls a two-day-old recovery trend from the YTD low touched on Tuesday.
• A positive risk tone and the uncertainty about BoJ’s policy shift undermine the safe-haven JPY.
• Reviving bets for an early rate cut by the Fed could weigh on the USD and cap the USD/JPY pair.

The Japanese Yen (JPY) edges lower against its American counterpart during the Asian session on Friday and erodes a part of its recovery gains registered over the past two days, from the YTD low touched earlier this week. The uncertainty about the likely timing of when the Bank of Japan (BoJ) will exit the negative interest rates policy, along with the overnight rally in the US equity markets, turn out to be key factors undermining the safe-haven JPY. This, in turn, assists the USD/JPY pair to move back above the 150.00 psychological mark. That said, verbal intervention by Japanese authorities should limit losses for the JPY and cap the currency pair.

Meanwhile, the weaker US Retail Sales data released on Thursday revived bets that the Federal Reserve (Fed) will soon start cutting interest rates. This might continue to weigh on the US Dollar (USD) and further contribute to keeping a lid on the USD/JPY pair, warranting some caution before positioning for any further intraday appreciating move. Moving ahead, market participants now look to the US economic docket – featuring the release of the Producer Price Index (PPI), Housing Starts and the Preliminary Michigan Consumer Sentiment Index. This, along with speeches by influential FOMC members should provide a fresh impetus.

From a technical perspective, any subsequent move up is likely to confront some resistance near the mid-150.00s ahead of the 150.85-150.90 region, or a multi-month top set on Tuesday. Some follow-through buying beyond the 151.00 round figure will be seen as a fresh trigger for bullish traders and pave the way for a further appreciating move. Given that oscillators on the daily chart are holding in the positive territory and are still away from the overbought zone, the USD/JPY pair might then climb to the 151.45 intermediate hurdle. The momentum could extend further towards the 152.00 neighbourhood, or a multi-decade peak set in October 2022 and retested in November 2023.

On the flip side, the overnight swing low, around mid-149.00s, now seems to protect the immediate downside ahead of the 149.25-149.20 area and the 149.00 round figure. The latter should act as a key pivotal point, 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 147.70-147.65 zone.

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