The USD/JPY currency pair is experiencing renewed selling pressure, coinciding with market speculation that the Bank of Japan (BoJ) may raise interest rates in December. This shift in sentiment has been accompanied by a weaker US dollar, although recovering US bond yields are moderating potential losses. Furthermore, traders may be exercising caution and avoiding significant positions in anticipation of the upcoming US Nonfarm Payrolls report.
On Thursday, the USD/JPY pair reversed a substantial portion of the gains made earlier in the week. The uncertainty surrounding the BoJ’s interest rate strategy is likely contributing to this behavior among traders. Comments from BoJ officials imply that while rate hikes are being considered, there is also considerable caution regarding any premature increases. Reports suggest that a member of the BoJ’s board has urged a careful approach to rate adjustments, deepening the ambiguity regarding the timing of any hikes.
In the United States, economic data and statements from Federal Reserve officials have created a mixed outlook. The latest Beige Book indicated slight economic growth across most regions, while several Fed leaders emphasized a careful approach to lowering interest rates. They stressed that the risks of reducing rates too quickly may outweigh those of not easing enough. These insights, combined with a strong performance from the US economy, are shaping a cautious stance toward monetary policy adjustments.
Adding to the narrative, speculation regarding the economic impact of policies from the incoming presidential administration is also influencing market sentiment, with concerns that such changes could spark inflation. This has contributed to a modest increase in Treasury bond yields, providing some support against the weaker yen. Nevertheless, the US dollar has been struggling to build momentum, likely limiting any substantial recovery in the USD/JPY pair as traders await crucial economic indicators.
From a technical standpoint, key support levels have been identified in the 149.55 to 149.50 range, with further backing expected around 149.00 and the 100-day moving average at approximately 148.80. A decisive break below these levels could trigger additional selling pressure. Conversely, any recovery above the psychological level of 150.00 may encounter resistance at multiple points, ranging from 150.55 to 151.00. A break above these resistances could signal a shift in momentum favoring bullish traders, potentially leading the pair up toward the 200-day moving average.
