The Japanese Yen (JPY) has experienced a minor setback against the US Dollar (USD) following its recent peak, which was the highest in over a month. The decline comes amid ongoing speculation regarding potential interest rate hikes by the Bank of Japan (BoJ) in December, along with concerns stemming from global trade tensions and geopolitical risks that could lend support to the Yen. The recent fall in US bond yields has also contributed to a weakening of the Dollar, capping its rise against the Yen.
As the Asian trading session unfolded on Thursday, the JPY pulled back from its five-week high reached the day before. The absence of significant economic indicators has made it likely that the intraday losses for the Yen will be modest. Traders are particularly focused on the possibility of a BoJ interest rate increase set for December. Concurrently, trade-related uncertainties, particularly those connected to tariff threats from the US, are reinforcing the JPY’s appeal as a safe-haven asset.
The relationship between investor sentiment and US economic data has shifted, particularly with the nomination of a new US Treasury Secretary. Recent US macroeconomic reports have not lessened expectations that the Federal Reserve might lower interest rates by 25 basis points in the upcoming December meeting. This anticipated easing has driven US Treasury yields to their lowest levels in a month, creating downward pressure on the Dollar, which has now fallen to a two-week low against the Yen.
Data reflecting the US economy’s performance showed a steady expansion during the third quarter, alongside rising consumer spending. However, labor market updates illustrated only minor fluctuations in unemployment claims. While these indicators do not strongly reinforce the case for a Federal Reserve rate cut, market expectations are still leaning towards a possibility of another reduction. Nonetheless, inflationary concerns linked to the new administration’s policies could revitalize demand for the Dollar, simultaneously providing some support for the USD/JPY pair.
The current trading environment for USD/JPY signifies volatility, particularly with critical resistance and support levels in play. A key factor is the break below the 200-day Simple Moving Average, which signifies bearish momentum for traders. Furthermore, indicators suggest a potential for continued depreciation of the Dollar against the Yen, although any recovery in USD/JPY might hit resistance around significant range levels, including the 152.00 level. Conversely, immediate support levels for the Yen reside near the 150.00 psychological threshold and the Fibonacci retracement level, which, if breached, could escalate further declines.
