The Japanese Yen (JPY) extended its intraday gains on Thursday, pushing the USD/JPY pair to a fresh daily low near the mid-154.00s during the European session. While Bank of Japan (BoJ) Governor Kazuo Ueda refrained from discussing monetary policy specifics, he signaled the possibility of an interest rate hike in December. This, coupled with lingering geopolitical tensions from the Russia-Ukraine conflict, bolstered the safe-haven appeal of the JPY, despite fears of potential market intervention.
Limited Follow-Through as Risk Sentiment Supports USD
However, further appreciation of the JPY remains constrained due to a positive market risk tone and rising U.S. Treasury bond yields. Investors are betting on fiscal policies from U.S. President-elect Donald Trump to boost inflation, potentially prompting the Federal Reserve to slow its interest rate cut trajectory. This dynamic supports U.S. bond yields and sustains demand for the U.S. Dollar (USD), curbing aggressive gains for the lower-yielding JPY.
BoJ and Economic Outlook Shape Market Sentiment
BoJ Governor Ueda reiterated that monetary decisions are made on a case-by-case basis, with markets now pricing in an equal probability of a 25-basis-point rate hike or a hold decision during the BoJ’s December 18–19 policy meeting. Meanwhile, Japanese Economic Revitalization Minister Akazawa’s proposed economic package, estimated at ¥21.9 trillion, is expected to play a critical role in the country’s economic recovery.
Fed Officials Signal Caution Amid Inflation Concerns
On the U.S. side, Federal Reserve policymakers remain cautious. Fed Governor Lisa Cook indicated that slower inflation progress might prompt the central bank to pause its rate-cut cycle. Governor Michelle Bowman echoed this sentiment, observing a stall in inflation improvement and urging a measured approach. Meanwhile, Boston Fed President Susan Collins acknowledged the need for more rate cuts but cautioned against overly aggressive moves. New York Fed President John Williams, however, highlighted ongoing inflation cooling in an interview, suggesting further declines in interest rates.
Key Economic Data on the Horizon
Traders are now closely monitoring upcoming U.S. macroeconomic data and speeches from Federal Open Market Committee (FOMC) members for near-term market direction. In Japan, the focus shifts to the National Core Consumer Price Index (CPI), a critical input for the BoJ’s December policy deliberations.
Technical Analysis: USD/JPY Bulls Maintain Control Above 100-Period SMA
From a technical standpoint, the USD/JPY pair remains resilient above the 100-period Simple Moving Average (SMA) on the 4-hour chart. Positive daily chart oscillators suggest that any pullbacks could be seen as buying opportunities near the 154.60–154.65 region, with 154.00 providing critical support. A breach of this level might expose the weekly low around 153.25.
On the upside, the immediate resistance lies near the Asian session peak of 155.40, with a potential rally towards the 156.00 mark. Sustained buying pressure could drive the pair to retest the multi-month high of 156.75, achieved last Friday.
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