The Japanese Yen (JPY) retained its robust intraday momentum heading into Friday’s European session, keeping the USD/JPY pair near the psychological 150.00 mark, just above a one-month low. This movement is fueled by stronger-than-expected consumer price data from Tokyo, bolstering expectations for a December interest rate hike by the Bank of Japan (BoJ). Simultaneously, geopolitical risks and concerns over trade tensions sustain safe-haven demand for the Yen.
Tokyo CPI Fuels Speculation of BoJ Tightening
Data released Friday revealed a sharp rise in Tokyo’s Consumer Price Index (CPI). Headline inflation climbed 2.6% year-on-year in November, up from 1.8% the previous month. Core CPI, excluding fresh food, also grew 2.2%, with the same rate seen in the gauge that excludes both energy and fresh food.
Additional economic indicators offered mixed signals. Japan’s unemployment rate edged up to 2.5% in October as expected, while retail sales showed annual growth of 1.6%, exceeding September’s 0.5% but falling short of the 2.2% forecast. Industrial production expanded 3% month-on-month in October, below the anticipated 3.9% growth.
Despite the mixed data, surging inflation strengthens the case for another BoJ rate hike at its upcoming monetary policy meeting.
US Factors Weigh on the Dollar
In the United States, bond yields remained subdued amid expectations of a December rate cut by the Federal Reserve. The nomination of Scott Bessent as Treasury Secretary, seen as a fiscal conservative, further curbed bond yields as markets anticipate stricter control over deficits.
The USD slid to a fresh two-week low, compounding pressure on the USD/JPY pair. The pair has now fallen nearly 700 pips from its November peak, intensifying its downward trajectory.
Technical Outlook: USD/JPY Under Pressure
From a technical perspective, the USD/JPY pair broke below the critical 38.2% Fibonacci retracement level of the September-November rally and the 150.00 mark, signaling further bearish sentiment. Daily chart oscillators suggest additional downside potential, with the next key support around 149.45. A deeper slide could see the pair test the 148.00 zone, near the 50% retracement level.
Conversely, resistance lies at the 150.45 mark, followed by the significant 152.00 level, which aligns with the 200-day Simple Moving Average. A break above this could trigger a recovery toward the 153.00-153.35 region.
Broader Implications
The Yen’s strength reflects a combination of domestic inflation dynamics and global risk aversion. As geopolitical and economic uncertainties persist, the JPY’s safe-haven appeal and potential BoJ policy tightening may continue to dictate market movements in the near term.
Related Topics:
- What is the Policy Rate of BOJ?
- What is the BoJ Report?
- How Much of the Bond Market Does the BOJ Own?
