The Japanese Yen (JPY) is experiencing a pullback from recent gains following the release of the Manufacturing Purchasing Managers Index (PMI) by Jibun Bank and S&P Global on Friday. The USD/JPY pair has seen a decline as the Yen strengthened after comments from Bank of Japan (BoJ) Governor Kazuo Ueda on Thursday, which bolstered expectations for a potential rate hike in December.
The Jibun Bank Japan Manufacturing PMI for October registered at 49.2, down from 49.7 in September. This composite indicator highlights a continued contraction in Japanese manufacturing production at the start of the fourth quarter of 2024, with both output and new order inflows decreasing at accelerated rates.
On Friday, Japan’s Chief Cabinet Secretary Yoshimasa Hayashi expressed confidence that the Bank of Japan will work closely with the government to implement appropriate monetary policies aimed at sustainably achieving its price target.
Market participants are also awaiting the US Nonfarm Payrolls (NFP) report, expected to show that the US economy added 113,000 jobs in October, with the unemployment rate predicted to remain steady at 4.1%.
In the daily market update, the USD/JPY pair gained as the US Dollar (USD) broke a four-day losing streak, driven by cautious sentiment ahead of the upcoming US presidential election. However, the Greenback faced challenges after the release of the Personal Consumption Expenditures (PCE) Price Index data on Thursday. This report indicated that core inflation rose by 2.7% year-over-year in September, while Initial Jobless Claims fell to a five-month low of 216,000 for the week ending October 25, reflecting a robust labor market and diminishing expectations for imminent interest rate cuts by the Federal Reserve (Fed).
Following its two-day monetary policy review, the Bank of Japan opted to maintain its short-term interest rate target at 0.25%, a decision aligned with market expectations. According to the BoJ’s Outlook Report for Q3, the central bank intends to continue raising policy rates as long as economic conditions and prices align with its forecasts, particularly given the currently low real interest rates. The BoJ aims to execute monetary policy with a focus on sustainably achieving its 2% inflation target.
US Gross Domestic Product (GDP) growth for Q3 was reported at an annualized rate of 2.8%, below the 3.0% growth seen in Q2 and below expectations. The ADP Employment Change report showed an addition of 233,000 jobs in October, marking the largest increase since July 2023, following an upward revision to 159,000 in September that significantly exceeded forecasts of 115,000. Additionally, the US Bureau of Labor Statistics (BLS) indicated that JOLTS Job Openings fell to 7.443 million in September, down from 7.861 million in August and below market expectations of 7.99 million.
Japan’s Economy Minister Ryosei Akazawa commented that a weaker Yen could lead to increased prices through higher import costs, potentially eroding real household income and dampening private consumption if wage growth fails to keep pace. The recent parliamentary election saw Japan’s Liberal Democratic Party (LDP)-coalition lose its majority, adding further uncertainty to the BoJ’s rate hike plans.
From a technical analysis perspective, the USD/JPY pair is trading around 152.40 on Friday. Chart analysis suggests a potential weakening of the bullish trend, as the pair has broken below its ascending channel. However, the 14-day Relative Strength Index (RSI) remains above 50, indicating that bullish momentum is still in play.
Resistance for the USD/JPY pair is currently at the lower boundary of the ascending channel, located at 152.50. Should the pair successfully re-enter this channel, it could aim for the upper boundary near 158.30. On the downside, support is anticipated around the 14-day Exponential Moving Average (EMA) at 151.50, with additional support found at the psychological level of 150.00.
Related Topics:
