The Japanese Yen (JPY) continues to struggle against the US Dollar (USD) on Friday, extending its weekly downtrend for the fifth consecutive day. The USD/JPY pair broke past the 153.00 mark during the Asian session, driven by market expectations that the Bank of Japan (BoJ) will keep interest rates steady next week and the recent rise in US Treasury yields. These factors, along with expectations for a less dovish Federal Reserve (Fed), continue to undermine the JPY.
Key Drivers Impacting JPY/USD
1. Bank of Japan (BoJ) Policy Expectations
Tankan Survey: The BoJ’s quarterly Tankan survey showed a slight improvement in business confidence among Japan’s large manufacturers. The headline index rose to +14 for Q4 2024, marking the highest level since March 2022.
Inflation & Wage Growth: Japanese firms expect inflation to rise by 2.4% over the next year, and wages have grown at their fastest pace since November 1992. These factors may support BoJ rate hikes in the future.
Mixed Signals on Rate Hike: Despite the positive survey results, reports suggest that the BoJ may hold off on a rate hike in December. While some officials, like BoJ Governor Kazuo Ueda, hint at the timing of future rate hikes, others, such as Toyoaki Nakamura, advocate for caution.
2. US Dollar and Treasury Yields Rise
US PPI Report: The US Producer Price Index (PPI) rose 0.4% in November, with the annual rate increasing from 2.6% to 3%, signaling inflationary pressures that could delay the Fed’s rate-cut cycle.
Impact on Treasury Yields: The rise in US Treasury bond yields, fueled by expectations of fewer and slower rate cuts from the Fed, continues to support the USD, further pressuring the JPY.
3. Focus on Upcoming Central Bank Decisions
BoJ and FOMC Meetings: Market attention is now on the upcoming policy meetings of both the BoJ and the Federal Open Market Committee (FOMC) next week. These meetings will provide further clarity on the future direction of interest rates in Japan and the US.
Technical Analysis: USD/JPY Set to Extend Breakout Momentum
Key Levels to Watch
Resistance: The USD/JPY pair has broken above the 153.00 mark and is eyeing resistance around the 153.70-153.80 region, where confluence resistance is found. A sustained move beyond this level could propel the pair toward the 153.65 area, near the 61.8% Fibonacci retracement of the recent pullback. The next target would be the 154.00 mark.
Support: On the downside, the 152.00-152.10 zone is a critical support area, which includes the 200-period Simple Moving Average (SMA) and the 50% Fibonacci retracement level. A break below 152.00 could open the door to further weakness towards the 151.75 and 151.00 levels, with the psychological 150.00 mark acting as the ultimate support.
Momentum Indicators
Oscillators: Daily and 4-hour chart oscillators remain in positive territory, suggesting the potential for further upward momentum in the pair.
Related Topics:
