USD/JPY keeps the red around 133.00 mark amid bank crisis fears, softer USD

  • For the second consecutive day, USD/JPY is experiencing some selling pressure on Thursday.
  • The JPY gains from worries about a full-blown global banking crisis, which puts pressure on the pair.
  • An other factor in the offered tone surrounding the major is a slight USD weakness.

On Thursday, some sellers enter the market for the second straight day as the USD/JPY pair struggles to benefit from the overnight late rebound from the 132.20 region, or a one-month low. But still down almost 0.40% for the day, the pair manages to recover a few pip from the daily low and trades around the 133.00 level in the early European session.

Notwithstanding the Credit Suisse scandal’s good developments, fears of further financial turbulence throughout the world continue to push haven-seekers towards the Japanese Yen (JPY) and put pressure on the USD/JPY exchange rate. The ailing Swiss bank declared that it would use a borrowing option from the Swiss National Bank (SNB) of up to $54 billion to bolster liquidity. Nonetheless, in the wake of the failure of two mid-sized American banks, Silicon Valley Bank and Signature Bank, investors are still concerned about a wider systemic problem. This is seen from the general market prudence, which is advantageous for traditional safe-haven currencies.

In addition, a slight decline in the value of the US dollar turns out to be a headwind for the USD/JPY pair, albeit the likelihood of future Federal Reserve policy tightening helps to contain losses. Investors continue to anticipate that the US Federal Reserve will raise rates by at least 25 basis points at its forthcoming policy meeting on March 21 and 22. The Bank of Japan (BoJ), in contrast, is anticipated to maintain its dovish approach in order to sustain the flimsy domestic economy. In fact, Kazuo Ueda, the new governor of the Bank of Japan, recently emphasised the need of preserving the ultra-loose policy settings and stated that the central bank isn’t looking to quickly end a decade of huge easing.

Before making aggressive negative wagers on the USD/JPY pair and setting up for an extension of last week’s rejection decline from the 200-day Simple Moving Average, caution is advised due to the aforementioned fundamental background (SMA). Traders are now focusing on the US economic calendar, which includes the release of the weekly initial claims for unemployment insurance, the Philadelphia Fed manufacturing index, building permits, and housing starts. In addition, the volatility caused by the European Central Bank (ECB) may give a new push.