Japanese Yen Stays Near Daily Low in the Mid-153.00s Against USD Amid BoJ Uncertainty

The Japanese Yen (JPY) faced selling pressure on the first trading day of the week after the Bank of Japan’s (BoJ) Summary of Opinions from the October meeting revealed divisions among policymakers regarding the timing of future rate hikes. This uncertainty, coupled with political instability in Japan, dampens confidence in the BoJ's ability to tighten monetary policy further, keeping the JPY under pressure against the US Dollar (USD) as the European session approaches.

Additionally, concerns that US President-elect Donald Trump may reintroduce protectionist trade measures against Japan further hurt demand for the JPY. However, Japan’s recent verbal intervention and the cautious market sentiment could help limit further losses for the Yen. With important macroeconomic data releases scheduled this week, including US consumer inflation figures, Japan’s preliminary Q3 GDP report, and a speech from Federal Reserve (Fed) Chair Jerome Powell, investors may choose to adopt a wait-and-see approach in the short term.

BoJ Uncertainty and Political Risk Keep JPY Under Pressure

• The Bank of Japan’s Summary of Opinions from the October 30-31 meeting revealed that policymakers discussed the potential impact of changes in US economic policies as they consider future interest rate hikes.
• Prime Minister Ishiba faces a leadership vote in Japan’s parliament today, following a loss of the ruling Liberal Democratic Party's (LDP) majority in the lower house. The government may need support from minor parties to form a new coalition.
• The possibility of a fragile minority government in Japan raises doubts about the BoJ's ability to hike interest rates further, undermining the safe-haven Japanese Yen as the week begins.
• The US Dollar is consolidating its recent gains, remaining close to a four-month high reached after the market’s positive reaction to Donald Trump's victory in the US presidential election last week.
• Investors are increasingly confident that Trump's expansionary policies will boost inflation, limiting the Federal Reserve's ability to ease policy aggressively, which continues to support the Greenback.
• Minneapolis Fed President Neel Kashkari stated over the weekend that the Fed needs more evidence that inflation is returning to the 2% target before deciding on further interest rate cuts.
• Investors are now focused on key US data releases this week, including consumer inflation figures on Wednesday, the Producer Price Index (PPI) on Thursday, and the preliminary Q3 GDP from Japan, along with US Retail Sales data on Friday.
• In addition, speeches from influential FOMC members, including Fed Chair Jerome Powell on Friday, will be crucial in guiding USD price dynamics and determining the next direction for the currency pair.

Technical Outlook: USD/JPY Eyes 154.00 as Resistance Holds

From a technical perspective, the USD/JPY pair has managed to hold above the crucial 200-day Simple Moving Average (SMA), suggesting an upward bias. With daily oscillators turning positive, the path of least resistance for the pair appears to be to the upside. However, the pair faces immediate resistance in the mid-153.00s. A strong move beyond this level could signal further upside potential, with the 154.00 mark in sight, followed by the multi-month high near 154.70.

On the downside, the Asian session low near 152.60 is expected to provide immediate support. A break below this level could lead to a pullback towards the 152.00 round figure and the 200-day SMA around 151.70. A decisive break below this support would shift the near-term bias to bearish, signaling a potential reversal of the recent upward move.