Important events today:

18:00 UTC – USD: ISM Manufacturing Index

The Japanese Yen (JPY) strengthened sharply against its US counterpart and hit a two-week high on Thursday after Bank of Japan (BoJ) board member Hajime Takata made a clear hint of an imminent rate hike. At the same time, BoJ Governor Kazuo Ueda spoke somewhat cautiously and tempered speculation of an imminent policy rate hike. Moreover, investors seem convinced that the recession in Japan may force the BOJ to postpone its plan to move away from ultra loose policy. This, along with the continuation of the recent stock market rally, has kept the safe-haven yen from rising further.

In addition, the emergence of some US Dollar (USD) buying helped the Dollar-Yen pair to bounce about 75 pips from the 149.20 area and gain some positive momentum during the Asian session on Friday. Meanwhile, the US Personal Consumption Expenditures (PCE) price index for January matched expectations and showed that the annual inflation increase was the smallest in almost three years. This confirmed market bets that the Federal Reserve (Fed) will start cutting interest rates at its June meeting. This may deter dollar bulls from aggressive bets and limit further growth of the currency pair.

Recommendations: We trade in the channel 150.00-150.80 on bounces from the levels of