Yen steady as BoJ hike bets grow amid risk-on mood
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The Japanese Yen (JPY) continues to display resilience despite maintaining a slight negative bias heading into the mid-week European session. With the Bank of Japan's (BoJ) highly-anticipated rate decision on the horizon, market participants remain cautious. Diverging monetary policy expectations between the BoJ and the Federal Reserve (Fed) contribute to a complex environment for USD/JPY, which is recovering modestly from over a one-month low near the 156.00 level.
BoJ rate hike expectations underpin Yen strength
Hawkish rhetoric from the BoJ and growing confidence in Japan's ability to sustain wage growth above inflation have fueled speculation of a rate hike.
Japan's largest trade union, Rengo, supports wage growth momentum
Prime Minister Shigeru Ishiba to highlight wage policy in economic revival plan
Keidanren and trade unions begin negotiations for significant wage increases
Market confidence in the BoJ's potential decision to raise interest rates from 0.25% to 0.5% during the January 23-24 policy meeting has soared, with a 90% probability now priced in. This would represent the highest rate since the 2008 financial crisis and significantly bolster the Yen's position.
US factors limit Yen upside
The USD's modest recovery, supported by a slight rebound in Treasury yields, has capped the Yen's gains. Easing US inflationary pressures, as indicated by recent PPI and CPI data, have strengthened expectations for the Fed to cut rates twice later this year. However, lingering uncertainty around US President Donald Trump's tariff proposals on Canada and Mexico has added complexity to market dynamics.
Technical overview: key levels to watch
USD/JPY's resilience below 155.00 suggests potential for further recovery, though bearish traders remain cautious. A decisive break below the lower boundary of the ascending channel could accelerate the pair's decline towards 154.50 and beyond.
On the upside, immediate resistance lies at the 156.25 level, followed by weekly highs near 156.55. Sustained momentum could propel USD/JPY towards the 157.60 region and potentially the multi-month peak of 159.00, last seen on January 10.
Looking ahead: BoJ decision in focus
As traders await the BoJ's rate decision and accompanying economic outlook, the Yen's trajectory will hinge on central bank actions and their implications for global monetary policy divergence. Combined with broader risk sentiment and US trade developments, the coming days promise heightened volatility for the currency pair.
BoJ rate hike expectations underpin Yen strength
Hawkish rhetoric from the BoJ and growing confidence in Japan's ability to sustain wage growth above inflation have fueled speculation of a rate hike.
Japan's largest trade union, Rengo, supports wage growth momentum
Prime Minister Shigeru Ishiba to highlight wage policy in economic revival plan
Keidanren and trade unions begin negotiations for significant wage increases
Market confidence in the BoJ's potential decision to raise interest rates from 0.25% to 0.5% during the January 23-24 policy meeting has soared, with a 90% probability now priced in. This would represent the highest rate since the 2008 financial crisis and significantly bolster the Yen's position.
US factors limit Yen upside
The USD's modest recovery, supported by a slight rebound in Treasury yields, has capped the Yen's gains. Easing US inflationary pressures, as indicated by recent PPI and CPI data, have strengthened expectations for the Fed to cut rates twice later this year. However, lingering uncertainty around US President Donald Trump's tariff proposals on Canada and Mexico has added complexity to market dynamics.
Technical overview: key levels to watch
USD/JPY's resilience below 155.00 suggests potential for further recovery, though bearish traders remain cautious. A decisive break below the lower boundary of the ascending channel could accelerate the pair's decline towards 154.50 and beyond.
On the upside, immediate resistance lies at the 156.25 level, followed by weekly highs near 156.55. Sustained momentum could propel USD/JPY towards the 157.60 region and potentially the multi-month peak of 159.00, last seen on January 10.
Looking ahead: BoJ decision in focus
As traders await the BoJ's rate decision and accompanying economic outlook, the Yen's trajectory will hinge on central bank actions and their implications for global monetary policy divergence. Combined with broader risk sentiment and US trade developments, the coming days promise heightened volatility for the currency pair.