The Japanese Yen (JPY) strengthened against the US Dollar (USD) during Friday’s Asian session, buoyed by the Bank of Japan’s (BoJ) more hawkish stance and a global shift in risk sentiment. While major central banks, including the US Federal Reserve (Fed), are expected to lower interest rates, the BoJ is signaling further hikes, which has supported the Yen. Additionally, the recent drop in US Treasury bond yields has weighed on the Greenback, keeping the USD/JPY pair near the psychological 150.00 level.
Traders remain cautious ahead of the upcoming US Nonfarm Payrolls (NFP) report, which will provide crucial insights into the Fed’s likely rate-cut trajectory. The uncertainty around US labor data has contributed to subdued trading in USD/JPY, with market participants hesitant to take strong directional positions.
BoJ’s Hawkish Tone and Global Uncertainty Underpin JPY
The Japanese Yen has struggled to gain consistent traction as traders await clearer guidance from the BoJ regarding future rate hikes. BoJ Governor Kazuo Ueda recently stated that rate hikes are becoming more likely, given favorable economic data, while BoJ board member Toyoaki Nakamura emphasized the need for caution in tightening policy.
Meanwhile, global geopolitical concerns have added to the Yen’s appeal as a safe haven. Russia’s ongoing assault on Ukraine and escalating fears of renewed global trade wars, particularly involving US President Donald Trump’s trade tariffs, have tempered investor risk appetite, boosting demand for the JPY.
The US Dollar remains under pressure, with the latest data from the US Department of Labor showing a rise in Initial Jobless Claims to 224,000 for the week ending November 29. Despite this, market expectations for a rate cut by the Federal Reserve in December remain high, with the CME Group’s FedWatch Tool showing a 70% probability of a 25 basis point reduction.
USD/JPY Faces Key Technical Levels
Technically, USD/JPY is finding support near the 149.65 level ahead of the 100-day Simple Moving Average (SMA) at around 148.80. A break below this could trigger further downside, with the next support levels located at 148.10-148.00 and 147.35-147.30.
On the upside, the pair faces resistance at 150.55, followed by 150.70, 151.00, and a weekly high near 151.20-151.25. A sustained break above these levels could signal a recovery, with a potential rally toward the 152.00 mark and the crucial 200-day SMA.
As the market awaits the US NFP report, any significant deviation from expectations could trigger a sharp move in USD/JPY, with the currency pair likely to stay range-bound until the data is released.
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