Bank of Japan's Dovish Line Pushes Yen DownSTRATEGY LONG TARGET 175USD YEN
The market thinks the Bank of Japan’s new governor is negative for the yen and a plus for stocks, at least based on his first policy board meeting.
In fact, the headline NFP print showed that the US economy added 253K new jobs in April against 179K anticipated, offsetting the downwardly revised reading of 165K. Adding to this, the unemployment rate unexpectedly fell to 3.4% during the reported month from 3.5% in March, which assists the US Dollar (USD) to regain strong positive traction and provides a goodish lift to the USD/JPY pair.
Apart from this, a positive turnaround in the global risk sentiment - as depicted by a goodish recovery in the equity markets - undermines the safe-haven Japanese Yen (JPY) and further contributes to the bid tone surrounding the USD/JPY pair. That said, the Federal Reserve's (Fed) less hawkish stance holds back the USD bulls from placing aggressive bets and keeps a lid on any further gains, at least for now.
Nevertheless, the USD/JPY pair, for now, seems to have snapped a three-day losing streak and stalled this week's sharp retracement slide from the 137.75-137.80 region, or a two-month high. Spot prices, however, remain on track to register losses for the first time in the previous four weeks. This makes it prudent to wait for strong follow-through buying before placing fresh bullish bets around the major.
After Gov. Kazuo Ueda presided over his first meeting, the bank emphasized that it would continue monetary easing to support growth in wages and prices. That was enough to persuade market players that an interest-rate increase isn’t in the cards soon.
Late Friday in Tokyo, the yen was trading at around 136 to the dollar, compared with around 134 to the dollar before the central bank’s midday decision.
The USD/JPY pair catches aggressive bids during the early North American session and jumps to the 135.00 psychological mark in reaction to the stellar US monthly employment details.
USD BULLISH
When the dust settles, the Fed is set to continue raising rates
US to have permanently higher rates than elsewhere
Re-acceleration of inflation and its win over the Fed will continue to catch the market by surprise
The Dollar is higher for longer, alongside the Fed’s narrative
Stagflation to take USD even higher
Hot CPI means the Fed pivot is well beyond the horizon
Ugly inflation promises further flight to safety
US at war means a stronger dollar
Outlook for Fed monetary policy now more hawkish
Powell projects pain, higher rates for longer set to keep the dollar bid
There is no alternative to the US dollar
No recession for America's labor market, more dollar gains eyed
Fed Chair Powell prioritizes fighting inflation, and ready to see negative growth
