The USD/JPY currency pair is experiencing renewed buying interest, although the overall momentum remains uncertain. Market dynamics are influencing the Japanese Yen, which is limiting potential gains for the pair as traders adopt a cautious stance in anticipation of upcoming significant economic data from the United States.
In early Tuesday trades, the USD/JPY regained some positive traction after experiencing notable volatility in previous sessions, hovering around the psychological level of 150.00. The uptick comes despite the currency pair nearing a six-week low reached on Monday, driven by increasing speculation regarding a potential interest rate hike by the Bank of Japan in December. Recent data showed a stronger-than-expected Tokyo November Consumer Price Index, indicating a rise in underlying inflation. Furthermore, comments from the Bank of Japan’s Governor highlighted the possibility of adjusting monetary policy based on forthcoming economic indicators.
Geopolitical tensions are also impacting the market, with ongoing issues related to the Russia-Ukraine conflict and U.S. tariff proposals under discussion. The incoming U.S. president has indicated plans for significant tariffs on major trading partners, raising concerns over inflation and prompting speculation about the Federal Reserve maintaining elevated interest rates for an extended period. Market expectations currently suggest a near 75% likelihood of a rate cut from the Federal Reserve in the near term, further limiting upward movement in the USD/JPY .
As investors await critical U.S. macroeconomic reports, including the Nonfarm Payrolls data and statements from the Federal Reserve Chair, market participants are willing to hold off on new positions. The technical outlook reveals that the 100-day Simple Moving Average at around 149.00 is a crucial support level. If this support is breached, it could trigger further declines towards the 148.20 and 147.00 levels. Conversely, if the USD/JPY can overcome resistance near 150.75 and 151.00, it may signal a shift in trading sentiment toward a bullish perspective.
