The Japanese Yen (JPY) continued its downward trend on Wednesday, pressured by robust US economic data that bolstered the US Dollar. This week’s stronger-than-expected US Manufacturing PMI and job openings reports pointed to a resilient US economy, driving the Greenback higher. However, traders are growing increasingly optimistic about the possibility of the Bank of Japan (BoJ) raising interest rates in the near term, which could provide some support for the Yen in the coming weeks.
Geopolitical tensions, including political instability in France, rising tensions in South Korea, and escalating risks in the Middle East, could further strengthen demand for safe-haven assets like the Yen. Market participants will also be closely monitoring key US economic reports due later on Wednesday, including the ADP Employment Change, final S&P Global Services PMI, ISM Services PMI, and the Federal Reserve’s Beige Book. Additionally, Fed Chairman Jerome Powell is scheduled to speak later in the day.
Market Sentiment and Asian Equity Moves
The broader market sentiment showed mixed results in Asia, with Japan’s Nikkei 225 futures rising by 0.15%, while South Korea’s Kospi fell by 1.97% following the rejection of proposed martial law by the country’s parliament. On the economic front, Japan’s Jibun Bank Services PMI for November showed an improvement, rising to 50.5 from 50.2 in October, slightly better than market expectations of 50.2.
Bank of Japan (BoJ) Governor Kazuo Ueda hinted over the weekend that the central bank could reduce its accommodative monetary policy if inflation trends toward the BoJ’s 2% target. This statement fueled speculation that a rate hike could be in the cards for the BoJ in the coming months.
US Labor Market Data Strengthens the Dollar
In the US, the latest data from the Bureau of Labor Statistics (BLS) showed that job openings increased to 7.74 million in October, up from 7.37 million in September, surpassing market expectations. Federal Reserve officials are also expressing optimism about the economy. Fed Governor Adriana Kugler noted that the labor market remains strong, and inflation is on a steady path toward the central bank’s 2% target, although she emphasized that future policy decisions are not predetermined.
Meanwhile, San Francisco Fed President Mary Daly suggested that a rate cut in December was not certain but remained a possibility, while Chicago Fed President Austan Goolsbee indicated that he expects significant rate cuts over the next year.
Technical Outlook: USD/JPY Faces Bearish Pressure
The USD/JPY currency pair remains under bearish pressure on the daily chart, with the exchange rate capped below the 100-day Exponential Moving Average (EMA). The Relative Strength Index (RSI) stands at 38, suggesting that further downside for the pair is likely in the short term.
A break below the lower Bollinger Band at 149.33 could trigger a steeper decline toward the September 2 high of 147.18, with the next major support level around 143.62, the low seen on August 6. On the upside, the 150.00 psychological level remains a key resistance, and a sustained rally could push the pair to the November 6 high of 154.70. A decisive break above this level could pave the way for a move toward 155.89, the high reached on November 20.
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