The Japanese Yen (JPY) has edged down against the US Dollar (USD), retreating from its recent recovery from the lowest levels seen since late July. This decline follows comments from Bank of Japan (BoJ) Governor Kazuo Ueda, who provided no indication of an imminent December rate hike, disappointing market expectations and weighing on the JPY. Additionally, a generally optimistic market sentiment has further diminished demand for the yen, traditionally seen as a safe-haven currency.
Despite this downward pressure, there remains speculation around potential intervention by Japanese authorities in the foreign exchange market to support the yen. These concerns have kept bearish traders from taking overly aggressive positions. Moreover, the lack of significant movement from the US Dollar could temper gains for the USD/JPY pair. Market participants appear to be biding their time ahead of Ueda’s upcoming media briefing, which may provide further insights into future monetary policy.
In his recent remarks, Governor Ueda emphasized that the BoJ will continue to adjust its policy based on economic conditions and inflation trends. While he acknowledged a moderate recovery in Japan’s economy, he also noted the presence of some weaknesses that could impact the timing of any rate hikes. Concurrently, Japan’s Finance Minister has indicated that the government will monitor fluctuations in the forex market closely and will take necessary actions against any excessive movements.
On the US side, global tensions have escalated following President Biden’s authorization for Ukraine to utilize US long-range missiles to strike deeper into Russian territory. This development has added to the already cautious stance on the US Dollar, which has seen recent gains but remains vulnerable to significant declines.
The economic landscape in the US is also shaped by inflationary pressures that may hinder the likelihood of further interest rate cuts by the Federal Reserve. Recent statements from Fed officials have reinforced a more cautious approach to monetary policy, with the current economic conditions indicating that there is no immediate need for aggressive easing. As investors adjust their outlook, expectations for further reductions in rates by the Fed have eased.
As the week progresses, the USD/JPY pair has shown some resilience near the 154.00 level. A subsequent upward movement, supported by positive technical indicators, may favor bullish investors. If the pair can maintain momentum above the psychological level of 155.00, it could pave the way for a push towards the 156.00 level. Conversely, should it fall below the immediate support at 153.85, there may be further declines towards the 153.25 and 153.00 levels, with significant support seen near the 152.70 – 152.65 range. A decisive break below this support could test the more critical 200-day Simple Moving Average, currently positioned near 151.85.
