The Japanese Yen has gained significant strength following the release of robust consumer inflation data from Tokyo, indicating a potential interest rate hike by the Bank of Japan (BoJ) in the coming month. November’s consumer price index (CPI) in Tokyo rose by 2.6% year-on-year, a notable increase from the previous month’s 1.8%. Additionally, core CPI, which excludes volatile food prices, also saw a rise of 2.2%. These figures are fueling speculation about an imminent rate increase at the BoJ’s next meeting in December.
This rally in the Yen is further supported by a backdrop of ongoing geopolitical tensions, particularly the Russia-Ukraine conflict, alongside concerns regarding US trade policies under President-elect Donald Trump. These factors have prompted a movement of funds into safer assets, such as the Yen, as global risk sentiment remains shaky.
Conversely, the US Dollar has been under pressure, settling near a two-week low. The decline is attributed to decreasing yields on US Treasury bonds, partially influenced by the recent nomination of Scott Bessent as Treasury Secretary, a choice expected to foster a conservative fiscal approach. This scenario is intensifying the market’s anticipation of interest rate cuts by the Federal Reserve in December, contributing to the decline of the USD/JPY exchange rate, which has fallen below the critical psychological level of 150.00.
From a technical standpoint, a breach below the 150.00 threshold could signal further downward momentum for the USD/JPY pair, targeting support levels near 149.45 and potentially extending to around 148.00. In contrast, resistance is expected around the 150.45 level, with the key 200-day Simple Moving Average at approximately 152.00 acting as a significant barrier. A sustained recovery beyond this point could lead to a rally towards higher resistance levels.
