The Japanese Yen (JPY) continued its decline against the US Dollar (USD) for the fourth consecutive day on Thursday, dropping below the 156.00 level for the first time since July 23. This weakness comes despite an increase in Japan’s Producer Price Index (PPI) for October, which rose at the fastest annual pace in over a year. However, political uncertainty surrounding Japan’s economic outlook, as well as concerns over potential trade tariffs under a future US administration, have weighed on the Yen.
The JPY’s struggles are compounded by expectations that expansionary fiscal policies under President-elect Donald Trump could stoke inflation, potentially prompting the Federal Reserve (Fed) to pause its interest rate cuts. Recent data from the US Bureau of Labor Statistics showed that the Consumer Price Index (CPI) for October rose 2.6% year-over-year, signaling slower progress in curbing inflation. This has led to speculation that the Fed could deliver fewer rate cuts in the coming year, supporting the USD. Furthermore, elevated US Treasury yields continue to lift the greenback, creating additional headwinds for the lower-yielding Yen.
Despite these pressures, speculation that Japanese authorities may intervene in the foreign exchange (FX) market to prevent excessive JPY weakness is keeping the currency from falling further. Masato Kanda, a special advisor to Japan’s Prime Minister, has stated that authorities will take appropriate action if necessary to counteract excessive FX movements. This intervention talk has kept traders from aggressively shorting the Yen, though the broader trend remains tilted toward further upside for USD/JPY.
As traders await key data releases, including the US Weekly Jobless Claims and Producer Price Index (PPI), attention will also turn to a speech by Fed Chair Jerome Powell and Japan’s preliminary Q3 GDP print, due for release on Friday. These events could provide fresh catalysts for USD/JPY movements in the near term.
Technicals Favor Bullish USD/JPY Outlook
From a technical perspective, the USD/JPY pair has recently broken through the 61.8% Fibonacci retracement level of the July-September decline and closed above the psychological 155.00 mark, signaling strength for bullish traders. Oscillators on the daily chart remain in positive territory, suggesting further upside potential. The next key resistance is seen near 156.55-156.60, with the potential for further gains toward the 157.00 handle and the 157.30-157.35 supply zone.
On the downside, immediate support is seen around 155.35-155.30, with the 155.00 level acting as a key psychological barrier. A sustained break below this level could trigger technical selling, with the next support levels coming in at 154.55-154.50 and 154.00. Further downside could push the pair toward the 153.45 region, potentially shifting the near-term bias in favor of bearish traders if broken decisively.
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