The Japanese Yen (JPY) lost ground against the US Dollar (USD) on Friday, reversing an intraday gain driven by stronger-than-expected domestic inflation data. Broader market dynamics, including expectations of delayed Bank of Japan (BoJ) rate hikes and elevated US Treasury yields, undermined the safe-haven currency.
Japanese Inflation Exceeds BoJ Target
Data from the Japan Statistics Bureau revealed that the national Consumer Price Index (CPI) for October eased to 2.3% year-on-year (YoY) from 2.5% in September. Core CPI, which excludes fresh food costs, remained at 2.3%, exceeding the BoJ’s 2% target. A deeper measure, stripping out both energy and fresh food, rose to 2.3% from 2.1%, signaling persistent inflationary pressures.
Despite these figures, BoJ Governor Kazuo Ueda emphasized the impact of foreign exchange movements on Japan’s economic outlook, leaving the door open for a potential rate hike in December. Geopolitical risks, such as the ongoing Russia-Ukraine conflict, also supported the Yen briefly during Asian trading hours.
USD Gains on Strong Data and Fiscal Speculation
The US Dollar surged to its highest level since early October, buoyed by robust economic data and speculation surrounding President-elect Donald Trump’s fiscal policies. Weekly Initial Jobless Claims fell to 213,000, the lowest level in seven months, while October’s Existing Home Sales rebounded to an annualized rate of 3.96 million units, marking the first annual gain since mid-2021.
Conversely, the Philadelphia Fed’s Manufacturing Index plunged to -5.5 in November from 10.3, highlighting uneven recovery in manufacturing activity. Chicago Fed President Austan Goolsbee and New York Fed President John Williams both noted cooling inflation and the possibility of a slower pace for rate cuts, keeping Treasury yields elevated.
Technical Outlook: USD/JPY Remains Resilient
The USD/JPY pair rebounded from below 154.00, bolstered by support at the 100-period Simple Moving Average (SMA) on the 4-hour chart. Daily chart oscillators remain in positive territory, suggesting dips toward the 153.30-153.25 range could attract buyers.
A drop below 153.00 could expose the pair to further losses, with significant support near the mid-152.00 range and the critical 200-day SMA at 152.00. On the upside, immediate resistance lies at 155.00, with further gains targeting the 156.00 handle and last week’s multi-month peak near 156.75.
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