The Japanese Yen (JPY) recovered some of its significant intraday losses against the US Dollar (USD) on Wednesday, with the USD/JPY pair retreating to the mid-153.00s as the European session approached. The yen’s recovery was partly fueled by market speculation that Japanese authorities could intervene to support the domestic currency. Additionally, hawkish minutes from the Bank of Japan’s (BoJ) recent policy meeting, which suggested that the central bank would continue raising interest rates if economic conditions align, helped provide some support to the JPY.
A modest pullback in US Treasury yields also contributed to a profit-taking move in the US Dollar (USD), after it surged to its highest level since July. This dynamic benefited the lower-yielding JPY. However, the yen’s recovery is likely to face resistance due to political uncertainties in Japan and the prevailing risk-on sentiment, which could limit the yen’s ability to strengthen. Moreover, the growing likelihood of a Donald Trump victory in the US presidential race continues to support USD bulls and restricts the potential downside for the USD/JPY pair.
BoJ Signals Cautious Hawkishness Amid Global Uncertainties
The minutes of the BoJ’s September meeting revealed that the central bank plans gradual interest rate hikes, although it remains cautious about the uncertainties surrounding the global economy, particularly the US. BoJ Governor Kazuo Ueda’s hawkish remarks last week further indicated the possibility of tightening policy, which briefly supported the yen. However, market optimism quickly faded as doubts resurfaced regarding the BoJ’s ability to continue tightening amid Japan’s political landscape and broader global risks.
USD/JPY Supported by US Election Developments
The US Dollar surged following early exit polls indicating a lead for Republican candidate Donald Trump in crucial swing states, which led to a nearly 250-pip rise in the USD/JPY pair. This rally was fueled by expectations that a Trump victory could prompt inflationary tariffs and increase concerns about US deficit spending, both of which contributed to a sharp rise in US Treasury bond yields. The 10-year US government bond yield hit its highest level since July, further boosting the USD and dampening demand for the lower-yielding JPY.
Technical Outlook: USD/JPY Bulls Eye Further Gains
From a technical perspective, the USD/JPY pair remains in a bullish trajectory, with the potential for further gains if prices surpass the 153.85-153.90 region, followed by the 154.00 mark. With oscillators on the daily chart still in positive territory, the pair could climb toward the 154.60-154.70 resistance zone, with the 155.00 psychological level in sight.
On the downside, immediate support is seen near 152.30, with further downside risks if the pair drops below 152.00. Should the pair fall through the 151.30-151.25 region and test the 151.00 round figure, the 100-day Simple Moving Average (SMA) around 150.25 could offer support. A break below 150.00 would shift the near-term bias toward bearish traders, potentially triggering a deeper decline in the pair.
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