JPY Sell-Off Continues As USD Rebounds

Yen Under PressureThe Japanese Yen remains under pressure as we head towards the weekend. JPY has been under steady selling pressure this week as the BOJ’s continued commitment to keeping rates at ultra-low levels remains at odds with other central banks in the G10 space. Indeed, while the prospect of rate cuts has become a key market theme this year, the near-term pushback against easing expectations appears to have reinvigorated the short JPY trade.Fed Easing PushbackThe Fed has been highly vocal in pushing back against calls for near-term rate cuts. The FOMC minutes this week showed policymakers in agreement over the need to move cautiously and keep rates at current levels for as long as necessary to ensure that inflation is moving sustainably to target. With US data, for the most part, remaining resilient too, the Dollar remain buoyant for now, keeping JPY pressured.Central Bank DivergenceIndeed, across the G10 bloc (or at least for the Fed, ECB and BOE), the current dynamic of central banks signalling likely easing this year but firmly pushing back against near-term easing expectations, has weighed heavily on JPY. It seems for now; the focus has shifted away from anticipating potential BOJ tightening. However, while the JPY outlook remains weak for now, the medium-term view holds some bullish promise. If we do see the BOJ start to normalise policy, particularly if this coincides with rate cuts elsewhere, this will create seismic shifts across FX markets and could see JPY firmly higher through H2.Technical ViewsUSDJPYThe rally in USDJPY has seen the pair breaking back above the 148.98 level. With momentum studies bullish, the focus stays on further upside for now with 151.81 the main hurdle for bulls. The level was a major resistance point last year. If broken, 155.19 will then come into view as the next bull target.