On Thursday, the Japanese Yen (JPY) experienced a modest uptick against the US Dollar (USD), although the increase lacked strong momentum. The rise in US bond yields contributed support to the USD/JPY pair, as traders maintained a cautious stance ahead of the forthcoming US Nonfarm Payroll (NFP) report scheduled for Friday.
During the Asian trading session, the JPY moved higher, recovering from the previous day’s weekly low. The prospect of rising inflation in Japan has been fueling expectations of another interest rate hike by the Bank of Japan (BoJ) in December. Additionally, lingering geopolitical tensions and trade war apprehensions have further benefited the JPY, which traditionally relies on lower yields during times of uncertainty.
Contrasting this, remarks from prominent Federal Reserve officials, including the Fed Chair, have supported US bond yields. This has created a risk-on atmosphere that likely limits significant gains for the Yen while providing backing for the USD/JPY pair. Traders appear hesitant to make significant directional bets ahead of the highly anticipated NFP report.
Speculation about the Bank of Japan’s potential rate increase was bolstered by a stronger Tokyo Consumer Price Index for November. However, concerns persist within the BoJ regarding the sustainability of wage growth, which may impact future inflation expectations. This is particularly relevant amidst warnings from Russian officials about escalating military actions in Ukraine, adding to investor uncertainty.
In the US, economic indicators pointed towards a slight uptick in activity, with the recent Economic Beige Book suggesting improved business sentiments. However, the Institute for Supply Management’s Services PMI fell to a three-month low, raising concerns about economic resilience. As traders keep an eye on the upcoming Jobless Claims data, the NFP report will undoubtedly dominate market focus moving forward.
As for technical sentiment, the USD/JPY pair may face solid resistance around the 152.00 mark, coinciding with the important 200-day Simple Moving Average. Should the pair maintain strength above this level, it could indicate a shift towards a bullish trend after a recent correction. Conversely, if the pair dips below the psychological 150.00 level, further declines could bring it closer to key support zones around 149.55 and 148.80.
