- The USD/JPY currency pair has seen a resurgence in bullish momentum, with gains extending to the resistance level of 151.22 before stabilizing around 150.00 at the time of writing.
- This comes as the market awaits the release of US non-farm payroll data, which will have a significant impact on future expectations for the Bank of Japan's monetary policy.
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Yen Weakening Despite Hints of Interest Rate Hikes
Despite statements from some Bank of Japan officials expressing concerns about the sustainability of wage growth and indicating signs of a weakening economy, suggesting that some may oppose raising interest rates in December, the Japanese yen continues to weaken against other major currencies. In contrast, Bank of Japan Governor Kazuo Ueda stated over the weekend that further interest rate hikes are "approaching" as economic data continues to meet expectations. He also highlighted the importance of the momentum generated by wage negotiations in the 2025 fiscal year.
Currently, the market is expecting a 60% probability of a 25-basis point interest rate hike by the Bank of Japan this month, up from around 50% in recent weeks. However, there is still a division in the market regarding the timing of future interest rate hikes by the Bank of Japan.
Strengthening Factors for the US Dollar
Investors remain cautious about the strength of the US dollar, which has been supported by strong US economic data and threats of tariffs on other major economies by US President-elect Trump. Meanwhile, Federal Reserve Chairman Jerome Powell downplayed the possibility of tensions with the incoming Trump administration, stating that he expects officials to proceed cautiously while continuing to cut US interest rates. Recent economic data showed that the Federal Reserve's preferred measure of core inflation accelerated on an annual basis in October, providing support for a cautious approach to further cuts. At the same time, Powell noted that the downside risks to the labour market appear to have diminished.
Meanwhile, The Federal Open Market Committee (FOMC) will meet on December 17th and 18th. The Federal Reserve Chairman did not specify whether he favours cutting interest rates at that meeting.
US Economic Forecasts
In this regard, US Federal Reserve Governor Jerome Powell stated that the US economy is “in remarkably good shape,” adding that growth was stronger than previously thought. He added, “I feel very good about where the economy is and where monetary policy is.” Powell added that inflation has not yet returned to the US Federal Reserve’s 2% target, but he saw no reason why strong economic conditions should not continue.
Trading Tips:
The USD/JPY pair is an important safe-haven asset during times of uncertainty. Therefore, it is essential to monitor factors that could increase or decrease risk aversion. Additionally, the pair is often subject to carry trade strategies, which can drive it to significant levels in a short period.
USD/JPY Technical analysis and Expectations Today:
Dear reader, the direction of the US dollar against the Japanese yen USD/JPY price is turning upwards. As we mentioned before, the stability of the currency pair above the psychological resistance of 150.00 will enhance the bulls' movement and prepare for stronger gains. Especially, if the US jobs numbers come out at the end of the week stronger than expected because they may enhance the tightening of the US Federal Reserve's policy and thus the price of the US dollar. According to the performance of the technical indicators, the recent rebound gains have not moved the directions of both the RSI and the MACD indicators upwards so far, which confirms that the upward trend is awaiting stimulus. In contrast, and on the same time frame, the daily chart will remain the most important support levels of 148.60 and 147.00 for the strength of the bears' control and the evaporation of the recent hopes of rising. Finally, the price of the dollar / Japanese yen will be affected in the coming period by the policies of global central banks, Trump's trade wars, and his later comment on exchange rates.
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