The Japanese Yen (JPY) remains stuck in a narrow range against the US Dollar (USD) during Friday’s early European session, failing to build on modest gains from the previous day. While the near-term outlook for the Yen appears slightly bullish, supported by the Bank of Japan‘s (BoJ) hawkish stance, market participants are waiting for key US data to determine the next direction.
The BoJ’s more aggressive stance on rate hikes, contrasted with the Federal Reserve’s potential for further interest rate cuts, continues to provide a supportive backdrop for the Yen. However, the USD/JPY pair has struggled to move significantly away from the psychological 150.00 level as traders await the release of the US Nonfarm Payrolls (NFP) report. The data, due later today, could provide new insights into the Fed’s rate-cut trajectory, which will, in turn, influence the direction of the USD and the currency pair.
BoJ Rate Hike Speculation and Global Risk Sentiment Support JPY
The Yen’s performance has been underpinned by a combination of factors, including the BoJ’s plans to continue tightening monetary policy while other central banks, like the US Federal Reserve, ease their policy stance. BoJ Governor Kazuo Ueda recently indicated that the central bank is on track for more rate hikes, and while BoJ official Toyoaki Nakamura cautioned for a measured approach, market expectations remain high for further tightening.
Meanwhile, global risk sentiment has been fragile, with concerns over the ongoing Russia-Ukraine conflict and the potential for renewed global trade tensions. These factors have encouraged investors to seek safe-haven assets like the Yen, providing some support against the broader US Dollar.
Market participants are also closely following the yield movements on US Treasury bonds, with the 10-year yield remaining near its lowest level since October 22. This decline benefits the lower-yielding Yen, though a slight rebound in the US Dollar has kept the USD/JPY pair relatively stable.
Focus on US NFP Report and Fed’s Rate Decision
The upcoming US Nonfarm Payrolls report is expected to be a key driver for the USD/JPY pair. Investors are focused on any signs of weakness in the US labor market, which could increase bets that the Federal Reserve will lower interest rates at its next meeting in December. According to the CME Group’s FedWatch Tool, markets are pricing in a 70% chance of a 25 basis point rate cut at the December Fed meeting, which could add further pressure on the USD and support the Yen.
Thursday’s data showing a rise in Initial Jobless Claims to 224,000 for the week ending November 29 also contributed to the market’s view that the Fed may be more inclined to ease monetary policy.
Technical Outlook: Key Levels for USD/JPY
From a technical standpoint, the USD/JPY pair remains in a relatively tight range. The recent swing low near 148.65 provides immediate support, followed by the 149.00 level and the 100-day Simple Moving Average (SMA) at 148.80. A decisive break below the 100-day SMA would open the door for further downside, potentially targeting levels between 148.10 and 147.30.
On the upside, any recovery in the USD/JPY pair may encounter resistance near 150.55, followed by 150.70, the 151.00 round figure, and the weekly high of 151.20-151.25. A move beyond this resistance zone could push the pair toward the 152.00 mark and the 200-day SMA, suggesting a shift in bias toward bullish traders.
As traders await the US jobs report, the Yen’s ability to capitalize on its recent gains will hinge on the Fed’s next moves, offering potential volatility in the near term.
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