USD/JPY: Bulls hesitate on BoJ hike bets and pre-NFP caution
Press Hub UCapital
Share:
The USD/JPY pair edges higher, consolidating around the critical 150.00 level, supported by recovering US Treasury yields. However, lingering expectations of a December rate hike by the Bank of Japan (BoJ) and geopolitical tensions cap further gains. Key US macroeconomic data releases and Fed Chair Jerome Powell's speech later this week remain pivotal for determining the pair's near-term direction.
Key Factors Driving USD/JPY
The USD/JPY pair witnessed renewed buying on Tuesday, recovering from Monday's six-week low. However, bullish momentum remains muted due to mounting speculation about a potential BoJ rate hike in December. Recent stronger-than-expected Tokyo CPI data has intensified the narrative of rising inflation, which could prompt the BoJ to tighten its ultra-loose monetary policy.
Adding to this, BoJ Governor Kazuo Ueda reaffirmed over the weekend that further interest rate hikes are approaching, contingent on consistent economic data trends and inflation moving towards the central bank’s 2% target. This hawkish sentiment continues to underpin the Japanese Yen, limiting the upside for USD/JPY.
Meanwhile, geopolitical tensions stemming from President-elect Donald Trump's tariff plans are creating a mixed market environment. Proposed aggressive tariffs targeting major US trading partners and BRICS nations have stoked inflationary fears. These developments, alongside expectations of elevated US Treasury yields, provide modest support to the USD but fail to generate strong bullish conviction.
Technical Analysis: Mixed Signals Prevail The technical setup for USD/JPY remains delicate, with the pair rebounding from the critical 100-day Simple Moving Average (SMA) support near 149.00. This level now acts as a pivotal point, determining the pair’s next direction.
Support Levels:
149.00: Key 100-day SMA support. A break here would likely target the 148.20 level (50% Fibonacci retracement of the September-November rally).
147.00: Represents the 61.8% Fibonacci retracement level, a critical downside barrier.
Resistance Levels:
150.75: Immediate hurdle marked by the overnight swing high.
151.00: Psychological resistance; clearing this level could lead to a short-covering rally.
152.00: A decisive break above this level, aligned with the 200-day SMA, would signal a resumption of the broader bullish trend.
Outlook: Awaiting Key Catalysts
Investors remain cautious ahead of US macroeconomic data later this week, including the JOLTS report, Nonfarm Payrolls (NFP), and Fed Chair Powell’s speech. While the market is pricing in a 75% probability of a 25-basis-point Fed rate cut in December, any indication of a less dovish stance could provide fresh support to the USD/JPY pair.
Conversely, stronger Japanese data or clear signals from the BoJ about imminent rate hikes could accelerate Yen buying, exposing the USD/JPY pair to further downside risks.
For now, USD/JPY appears poised for a consolidative phase, with the 149.00 level acting as critical support and 151.00 serving as a key resistance pivot. Traders should watch for strong directional cues from upcoming events to confirm the pair’s next significant move.
Key Factors Driving USD/JPY
The USD/JPY pair witnessed renewed buying on Tuesday, recovering from Monday's six-week low. However, bullish momentum remains muted due to mounting speculation about a potential BoJ rate hike in December. Recent stronger-than-expected Tokyo CPI data has intensified the narrative of rising inflation, which could prompt the BoJ to tighten its ultra-loose monetary policy.
Adding to this, BoJ Governor Kazuo Ueda reaffirmed over the weekend that further interest rate hikes are approaching, contingent on consistent economic data trends and inflation moving towards the central bank’s 2% target. This hawkish sentiment continues to underpin the Japanese Yen, limiting the upside for USD/JPY.
Meanwhile, geopolitical tensions stemming from President-elect Donald Trump's tariff plans are creating a mixed market environment. Proposed aggressive tariffs targeting major US trading partners and BRICS nations have stoked inflationary fears. These developments, alongside expectations of elevated US Treasury yields, provide modest support to the USD but fail to generate strong bullish conviction.
Technical Analysis: Mixed Signals Prevail The technical setup for USD/JPY remains delicate, with the pair rebounding from the critical 100-day Simple Moving Average (SMA) support near 149.00. This level now acts as a pivotal point, determining the pair’s next direction.
Support Levels:
149.00: Key 100-day SMA support. A break here would likely target the 148.20 level (50% Fibonacci retracement of the September-November rally).
147.00: Represents the 61.8% Fibonacci retracement level, a critical downside barrier.
Resistance Levels:
150.75: Immediate hurdle marked by the overnight swing high.
151.00: Psychological resistance; clearing this level could lead to a short-covering rally.
152.00: A decisive break above this level, aligned with the 200-day SMA, would signal a resumption of the broader bullish trend.
Outlook: Awaiting Key Catalysts
Investors remain cautious ahead of US macroeconomic data later this week, including the JOLTS report, Nonfarm Payrolls (NFP), and Fed Chair Powell’s speech. While the market is pricing in a 75% probability of a 25-basis-point Fed rate cut in December, any indication of a less dovish stance could provide fresh support to the USD/JPY pair.
Conversely, stronger Japanese data or clear signals from the BoJ about imminent rate hikes could accelerate Yen buying, exposing the USD/JPY pair to further downside risks.
For now, USD/JPY appears poised for a consolidative phase, with the 149.00 level acting as critical support and 151.00 serving as a key resistance pivot. Traders should watch for strong directional cues from upcoming events to confirm the pair’s next significant move.