The Japanese Yen (JPY) has shown slight recovery against the U.S. Dollar (USD), reaching the 149.00 mark during Thursday’s European session after hitting its lowest level since early August. This movement follows the release of data indicating that Japan’s Producer Price Index (PPI) remained unchanged in September, with the yearly rate rising more than expected, which is seen as providing some support for the Yen.
Meanwhile, the U.S. Dollar is consolidating gains, reaching an eight-week high as traders await the latest U.S. consumer inflation figures. This cautious approach has led traders to temper their bullish positions on the USD/JPY pair. The uncertainty surrounding the Bank of Japan‘s (BoJ) potential rate hikes, coupled with a risk-on market sentiment, may limit JPY losses, especially with Japan’s snap election approaching on October 27.
Recent data showed a decline in Japan’s real wages and household spending in August, raising concerns about the strength of private consumption and economic recovery. Comments from Prime Minister Shigeru Ishiba regarding monetary policy have further fueled uncertainty about the BoJ’s rate hike plans, contributing to upward pressure on the USD/JPY pair.
The BoJ’s report revealed that the PPI remained steady against an anticipated decline, while the yearly rate unexpectedly increased from 2.6% in August to 2.8%. A quarterly survey indicated that 85.6% of Japanese households expect price increases within a year, slightly down from the previous 87.5%, which still offers support for the Yen.
On the U.S. side, Wednesday’s hawkish FOMC minutes highlighted concerns among policymakers about inflation, suggesting potential caution regarding future rate cuts. Dallas Fed President Lorie Logan advocated for smaller reductions, emphasizing the need to remain data-dependent to maintain labor market health.
As investors await the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) reports, expectations about the Fed’s rate-cut trajectory could significantly impact the USD/JPY pair.
From a technical perspective, sustained trading above the 149.00 mark and the 38.2% Fibonacci retracement level could attract bullish traders, with potential upside towards the psychological 150.00 mark. Conversely, significant dips below 149.00 might find support near 148.70-148.65, limiting downside risk for the pair.
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