USD/JPY stalls as BoJ hike speculation and US data shape market
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The USD/JPY pair remains caught in a tug-of-war as the Japanese Yen gains traction on mounting Bank of Japan (BoJ) rate hike expectations, while the US Dollar recovers modestly from recent lows. Despite these moves, the pair remains under pressure as traders await crucial US macroeconomic data for further direction.
BoJ expectations drive yen strength
The Japanese Yen has been bolstered by increasing bets on a potential BoJ rate hike during its January 23-24 meeting. BoJ Governor Kazuo Ueda's recent comments reiterated the central bank’s readiness to adjust policy if economic and price conditions continue to improve. Deputy Governor Ryozo Himino’s earlier remarks further cemented expectations for monetary tightening, pushing the yield on Japan’s 10-year government bonds to its highest level since 2011.
This hawkish stance comes against a backdrop of broadening inflationary pressures in Japan, providing strong fundamental support for the Yen. Meanwhile, falling US Treasury yields, driven by softer US inflation data, have narrowed the yield differential between the US and Japan, adding to the JPY's bullish momentum.
US dollar faces resistance
While the US Dollar has found some support amid speculation that the Federal Reserve may pause its rate-cutting cycle later this month, its recovery remains capped. The latest US Consumer Price Index (CPI) report indicated annual inflation rose to 2.9% in December, up from 2.7% in November. However, the core inflation measure eased slightly to 3.2%, below market expectations.
Richmond Fed President Tom Barkin highlighted progress in curbing inflation but stressed the need for restrictive monetary policy to maintain this trajectory. Despite these remarks, market sentiment remains buoyed by easing fears of disruptive trade policies under President-elect Donald Trump, further limiting the Greenback's upside.
Key levels for USD/JPY
The USD/JPY pair faces critical resistance near the 156.00 level, with additional barriers at 156.35-156.45 and 156.75. A break above these thresholds could shift the bias in favor of bullish traders, potentially targeting the 157.00 mark and beyond.
Conversely, immediate support lies near the 155.00 psychological level, with a further decline likely testing the 154.50 region. A decisive break below this zone could trigger a bearish extension, exposing the 153.35 level as the next significant support.
Outlook hinges on data and policy
With the BoJ policy meeting on the horizon, the Yen’s bullish trajectory appears intact, barring any surprises. However, traders remain cautious as upcoming US macro data, including the Federal Reserve's policy path, could introduce volatility and influence the USD/JPY pair’s direction.
BoJ expectations drive yen strength
The Japanese Yen has been bolstered by increasing bets on a potential BoJ rate hike during its January 23-24 meeting. BoJ Governor Kazuo Ueda's recent comments reiterated the central bank’s readiness to adjust policy if economic and price conditions continue to improve. Deputy Governor Ryozo Himino’s earlier remarks further cemented expectations for monetary tightening, pushing the yield on Japan’s 10-year government bonds to its highest level since 2011.
This hawkish stance comes against a backdrop of broadening inflationary pressures in Japan, providing strong fundamental support for the Yen. Meanwhile, falling US Treasury yields, driven by softer US inflation data, have narrowed the yield differential between the US and Japan, adding to the JPY's bullish momentum.
US dollar faces resistance
While the US Dollar has found some support amid speculation that the Federal Reserve may pause its rate-cutting cycle later this month, its recovery remains capped. The latest US Consumer Price Index (CPI) report indicated annual inflation rose to 2.9% in December, up from 2.7% in November. However, the core inflation measure eased slightly to 3.2%, below market expectations.
Richmond Fed President Tom Barkin highlighted progress in curbing inflation but stressed the need for restrictive monetary policy to maintain this trajectory. Despite these remarks, market sentiment remains buoyed by easing fears of disruptive trade policies under President-elect Donald Trump, further limiting the Greenback's upside.
Key levels for USD/JPY
The USD/JPY pair faces critical resistance near the 156.00 level, with additional barriers at 156.35-156.45 and 156.75. A break above these thresholds could shift the bias in favor of bullish traders, potentially targeting the 157.00 mark and beyond.
Conversely, immediate support lies near the 155.00 psychological level, with a further decline likely testing the 154.50 region. A decisive break below this zone could trigger a bearish extension, exposing the 153.35 level as the next significant support.
Outlook hinges on data and policy
With the BoJ policy meeting on the horizon, the Yen’s bullish trajectory appears intact, barring any surprises. However, traders remain cautious as upcoming US macro data, including the Federal Reserve's policy path, could introduce volatility and influence the USD/JPY pair’s direction.