The Japanese Yen (JPY) fell to a one-month low against the US Dollar (USD) on Thursday, after the Bank of Japan (BoJ) opted to keep interest rates unchanged. This decision, coupled with rising US Treasury bond yields and the Federal Reserve’s (Fed) cautious outlook on future rate cuts, drove investors away from the lower-yielding Yen, pushing the USD/JPY pair beyond the psychological 155.00 level during the Asian session.
The BoJ’s decision to maintain the short-term interest rate target within the 0.15%-0.25% range came as part of its regular monetary policy review. The central bank projected a pickup in the Consumer Price Index (CPI) in 2025, driven by higher wages and increased private consumption, which could lead to a rate hike as early as January or March. However, this outlook was tempered by risk-off sentiment, providing some support for the safe-haven Yen. Market participants remain cautious, awaiting further insights from BoJ Governor Kazuo Ueda’s press conference following the meeting.
Despite this, the broader fundamental environment remains tilted in favor of the USD. On Wednesday, the Fed lowered its benchmark policy rate by 25 basis points, marking its third rate cut since September, bringing the rate to 4.25%-4.50%. However, the Fed’s updated dot plot indicated that only two quarter-point rate cuts are anticipated in 2025, a reduction from the previously expected four cuts. Fed Chair Jerome Powell reiterated that inflation remains above the central bank’s 2% target, reinforcing the USD’s strength. As a result, US bond yields surged to their highest level since May 31, further strengthening the USD.
With rising US Treasury yields and the BoJ’s stance of keeping rates unchanged, flows continued to move away from the JPY, pushing the USD/JPY pair higher. Traders are now looking ahead to US macroeconomic data, including the final Q3 GDP reading and weekly jobless claims, as well as key inflation figures, such as the Personal Consumption Expenditures (PCE) Price Index, due for release on Friday.
In terms of technicals, the USD/JPY pair remains bullish as long as it stays above the 155.00 mark. A sustained move above this level could trigger further upside momentum, targeting the 155.40-155.45 range and potentially the 156.00 level. Beyond that, the pair may test the multi-month high around 156.75, reached in November.
On the downside, immediate support is seen around 154.25, with further declines potentially targeting the 154.00 level. If the 153.15 region is breached, the next support zone lies near 152.50. A drop below this level could shift the near-term outlook to a more bearish tone, with the 152.20 region, marked by the 20-day simple moving average, acting as critical support. A failure to defend this level might open the door for further losses towards the 151.00 mark.
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