The USD/JPY currency pair is experiencing significant selling pressure following the Bank of Japan’s recent policy announcement, which is causing the pair to hover near a new weekly low around 152.00. This decline coincides with the BoJ’s decision to maintain its current monetary policy amid recent political instability in Japan, particularly after the snap election held on Sunday. Although interest rates were left unchanged, the BoJ’s statement indicated a willingness to raise borrowing costs in response to a steady economic recovery and inflation aligning with forecasts, which has provided a boost to the Japanese Yen.
BoJ Governor Kazuo Ueda emphasized a cautious approach, stating that the central bank would continue to adjust policies based on economic and price developments. The mention of monitoring financial and foreign exchange markets has led to speculation about a potential rate hike in December, further benefiting the Yen as risk sentiment softens. Meanwhile, the US Dollar remains under pressure, recording a weekly low and retracting from a recent three-month peak.
However, the likelihood of a significant drop in the USD appears limited. There is growing consensus around the Federal Reserve’s plans for smaller interest rate cuts, a notion reinforced by robust economic data released midweek. Notably, the ADP report revealed that private-sector employers added 233,000 jobs in October, surpassing expectations, while previous figures were revised upwards. Additionally, a preliminary estimate indicated that the US economy grew at an annualized rate of 2.8% in the third quarter, demonstrating resilience compared to global trends.
Traders may be cautious and adopt a wait-and-see approach ahead of the upcoming release of the US Personal Consumption Expenditure Price Index, which could influence the outlook for Fed monetary policy. This inflation data is key to understanding future USD demand and its impact on the USD/JPY pair. The technical analysis also reveals that recent declines have tested critical support levels, suggesting caution prior to committing to new bullish positions. Any break below the 152.00 level may lead to further testing of support at 151.45, while resistance is positioned at 152.50 – 152.55 before reaching 153.00.
