The Japanese Yen (JPY) remains constrained within a familiar trading range, failing to gain meaningful traction against the US Dollar (USD) amid uncertainty surrounding the Bank of Japan’s (BoJ) monetary policy plans. Political uncertainties in Japan and ongoing bullish sentiment in equity markets continue to weaken the safe-haven appeal of the JPY. Simultaneously, rising US Treasury yields and a stronger USD exert additional pressure on the JPY, keeping the USD/JPY pair supported near recent highs.
BoJ’s Monetary Policy Uncertainty
Despite signs of economic momentum, including a 2.9% year-over-year increase in Japan’s Services Producer Price Index (PPI) for October, investors remain cautious about the BoJ’s next moves. Recent hawkish remarks by BoJ Governor Kazuo Ueda have kept the possibility of a December rate hike open, particularly if inflation is driven by robust domestic demand and higher wages. However, heightened domestic political uncertainty has led to reduced market bets on a December rate hike, dampening the Yen’s appeal.
US Dollar’s Strength and Fed Speculation
The US Dollar has regained traction following a previous day’s dip, underpinned by higher Treasury yields amid inflationary concerns linked to President-elect Donald Trump’s proposed tariff policies. Trump has announced plans to impose a 25% tariff on imports from Mexico and Canada, with an additional 10% on Chinese goods, stoking fears of increased inflation and limited rate-cut flexibility for the Federal Reserve (Fed).
Fed officials offered mixed signals about future monetary policy. Chicago Fed President Austan Goolsbee suggested continued rate cuts, barring evidence of economic overheating. Conversely, Minneapolis Fed President Neel Kashkari signaled openness to further reductions in December. Amid this backdrop, traders are eyeing the Federal Open Market Committee (FOMC) meeting minutes and other key US economic data, including Q3 GDP revisions and the Personal Consumption Expenditures (PCE) Price Index, for more clarity on the Fed’s trajectory.
JPY Outlook Remains Fragile
The USD/JPY pair continues to consolidate near its 100-period Simple Moving Average (SMA) on the 4-hour chart. Mixed technical indicators suggest caution, with immediate support around last week’s swing low at 153.30-153.25. A sustained break below this level could trigger further declines toward 152.00, the 200-day SMA.
Conversely, strong resistance lies at the 154.75-154.80 range. A breakout above 155.00 could push the pair towards the 155.40-155.50 zone, with momentum potentially extending to retest multi-month highs near 156.75.
Key Risks and Market Sentiment
Uncertainties persist as Trump’s tariff threats and concerns about their economic impact could temper investor appetite for riskier assets, offering some support to the Yen’s safe-haven status. However, fears of market intervention by Japanese authorities to stabilize the Yen warrant caution against aggressive bullish bets on the USD/JPY pair.
As markets await clarity from US economic data and FOMC minutes, the USD/JPY remains positioned for volatility, balancing between near-term support and resistance levels.
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