The Japanese Yen (JPY) gained modestly against the US Dollar (USD) during Thursday’s Asian session, buoyed by geopolitical concerns and inflationary pressures in Japan. However, mixed fundamentals, including dovish remarks from Bank of Japan (BoJ) board member Toyoaki Nakamura and hawkish signals from the Federal Reserve (Fed), limited follow-through buying for the Yen.
BoJ Signals Mixed Policy Outlook
The JPY has found some support from signs of accelerating underlying inflation in Japan, which bolsters the possibility of a December interest rate hike by the BoJ. Last week, BoJ Governor Kazuo Ueda’s hawkish remarks and stronger Tokyo Consumer Price Index data for November fueled speculation of further tightening. However, Nakamura tempered expectations by expressing doubts about sustainable wage growth and suggesting inflation may fall short of the 2% target beyond fiscal 2025.
Fed Caution and US Bond Yields Influence USD
On the US side, hawkish comments from key Fed officials, including Chair Jerome Powell, signaled caution in cutting interest rates, citing steady economic growth and progress on inflation. Powell emphasized the Fed’s ability to adopt a measured approach, while other officials, including San Francisco Fed President Mary Daly, underscored the need for further vigilance to achieve inflation goals. These remarks supported a slight rebound in US Treasury yields, providing underlying strength to the USD and capping JPY gains.
Geopolitical Risks and Economic Concerns
Persistent geopolitical tensions, such as Russia’s threats of military escalation in Ukraine and uncertainties surrounding US President-elect Donald Trump’s tariff policies, continue to underpin safe-haven demand for the JPY. Simultaneously, weaker-than-expected US economic data—such as the ISM Services PMI, which dropped to a three-month low of 52.1 in November—adds to concerns over the global economic outlook.
Technical Analysis: USD/JPY Outlook
From a technical perspective, the USD/JPY pair has shown resilience, recovering from its lowest level since October 11. However, oscillators on the daily chart remain in negative territory, suggesting limited upside potential in the short term.
Key resistance is seen near the 151.20-151.25 region, with a break above 152.00—a critical level coinciding with the 200-day Simple Moving Average (SMA)—required to confirm a bullish reversal. Sustained strength beyond this point would indicate that the recent correction from November’s multi-month high has concluded.
On the downside, support is located near the psychological level of 150.00, followed by 149.55-149.50. A break below the 100-day SMA, around 148.80, could trigger further bearish momentum, targeting the 148.00 region and potentially the 147.00 mark.
Market Focus
Traders now await the release of US Weekly Initial Jobless Claims data later Thursday, though the primary focus remains on Friday’s Nonfarm Payrolls (NFP) report. These data points will provide critical insights into the Fed’s policy trajectory and likely dictate the next directional move for the USD/JPY pair.
Related Topics:
