The Japanese Yen (JPY) extended its decline through Tuesday’s Asian session, pushing the USD/JPY pair further above the significant 150.00 psychological barrier. A modest strengthening of the US Dollar (USD) contributed to this movement, though speculation about a potential December interest rate hike by the Bank of Japan (BoJ) could temper aggressive bearish sentiment on the Yen.
Additionally, factors such as persistent geopolitical risks, concerns over US President-elect Donald Trump’s proposed tariffs, and a drop in US Treasury yields are providing some support to the lower-yielding JPY.
Market Dynamics: Focus on BoJ, Fed, and US Macro Data
The BoJ’s recent signals of potential monetary tightening have influenced market sentiment. Governor Kazuo Ueda hinted that adjustments to Japan’s monetary easing could occur if inflation trends solidify near the 2% target. Last week’s Tokyo Consumer Price Index (CPI) report, which showed accelerating inflation, bolstered expectations for a December rate hike.
In contrast, USD bulls appear cautious, awaiting further clarity on the Federal Reserve’s monetary policy path. Key US macroeconomic releases, including the Nonfarm Payrolls (NFP) report and a speech by Fed Chair Jerome Powell, are expected to guide the USD’s trajectory. While the Institute of Supply Management’s (ISM) Manufacturing PMI rose to 48.4 in November, signaling optimism about Trump’s proposed business-friendly policies, concerns remain about his tariff plans reigniting inflation and influencing the Fed’s rate strategy.
The CME Group’s FedWatch Tool indicates a 75% likelihood of a 25 basis-point rate cut by the Fed later this month. However, falling US Treasury yields, which have reached their lowest levels since late October, have narrowed the US-Japan yield differential, benefiting the Yen.
Technical Analysis: USD/JPY Navigates Critical Levels
From a technical perspective, the USD/JPY pair remains vulnerable despite its current strength. Last week’s dip below the 38.2% Fibonacci retracement of the September-November rally flagged bearish momentum. Daily oscillators remain in negative territory but are not yet oversold, indicating potential for further declines.
Support is seen near the 100-day Simple Moving Average (SMA) at 149.00, with a break below paving the way toward the 148.20 and 147.00 regions. Conversely, sustained moves above the 150.75 resistance and 151.00 levels could spark a rally toward the 152.00 mark, a key 200-day SMA level. A decisive break there would signal a bullish reversal.
Related Topics:
