The Japanese Yen (JPY) is facing continued pressure, falling back from an uptick during the Asian session that was spurred by a positive revision to Japan’s third-quarter GDP. The USD/JPY pair has since regained ground, rising back above the 150.00 mark, as market sentiment is clouded by uncertainty surrounding the Bank of Japan‘s (BoJ) future rate hike plans and a modest uptick in the US Dollar (USD).
Japan’s third-quarter GDP growth was revised upwards to 0.3%, surpassing the initial estimate of 0.2%, with year-on-year growth climbing to 1.2%. This exceeded earlier forecasts of 0.9%. However, the pace of growth has significantly slowed from the previous quarter’s 2.2%, and sluggish private consumption raises doubts about the sustainability of the economic recovery. These factors contribute to skepticism about whether the BoJ will raise interest rates in December, weighing on the Japanese Yen despite an initial rally.
Meanwhile, the Federal Reserve’s expected rate cuts are keeping US Treasury yields subdued, preventing the Yen from capitalizing on its typical safe-haven appeal. Furthermore, geopolitical tensions, including concerns about potential trade tariffs under US President-elect Donald Trump, may help limit the downside for the JPY.
Mixed US Data and Fed Outlook Fuel USD/JPY Volatility
Friday’s US economic data, including the November Nonfarm Payrolls (NFP) report, showed a stronger-than-expected 227,000 jobs added to the US economy, well above the anticipated 200,000. The Unemployment Rate edged up to 4.2% from 4.1%, but average hourly earnings remained steady at 4% year-on-year, above the 3.9% forecast. The robust labor market data has reaffirmed expectations that the Federal Reserve will proceed with another rate cut at its December meeting, despite concerns about inflation.
The University of Michigan’s December consumer sentiment gauge also rose, while one-year inflation expectations increased to 2.9% from 2.6% in November, signaling ongoing inflationary pressures. Comments from various Federal Reserve officials, including Cleveland Fed President Beth Hammack and San Francisco Fed President Mary Daly, suggest that while the US economy remains in good shape, the central bank is prepared to step in with further tightening if inflation picks up again.
However, the yield on the US 10-year Treasury note remains near its lowest level since October, capping the US Dollar’s recovery and preventing a more significant rebound in USD/JPY. These mixed factors have kept the Japanese Yen relatively resilient, as investors remain cautious ahead of upcoming US inflation data.
Technical Outlook: USD/JPY Faces Key Resistance Near 150.55
From a technical standpoint, USD/JPY is navigating a range-bound phase after its pullback from a multi-month high in November. The pair remains capped near the 150.55 resistance level, which coincides with a significant technical barrier. Oscillators on the daily chart are holding in negative territory, signaling that the path of least resistance may be to the downside, although the USD/JPY pair has shown resilience below the 100-day Simple Moving Average (SMA).
Immediate support is seen around the post-NFP low near 149.35, with further support likely at the 149.00 level and the 100-day SMA, currently positioned near 148.70-148.65. A break below this level could open the door for a move towards the 148.10-148.00 zone, and eventually the 147.35-147.30 range.
On the upside, any recovery in USD/JPY could face resistance near 150.55, followed by the 150.70 mark, the psychological 151.00 level, and last week’s swing high around 151.20-151.25. A sustained move above 151.25 could push the pair towards the 200-day SMA, located near 152.00, suggesting that any corrective decline from the November highs may have run its course.
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