- The Japanese yen continues to weaken amid uncertainty over potential rate hikes by the Bank of Japan.
- A strong U.S. dollar supports the USD/JPY pair’s rise to a multi-month high.
- Yen sellers remain unfazed by the possibility of intervention from Japanese authorities.
The Japanese yen (JPY) continues to face selling pressure during the Asian session on Thursday, pushing the USD/JPY pair beyond the 156.00 mark for the first time since July 23. Persistent uncertainty over the Bank of Japan’s (BoJ) ability to tighten monetary policy amid Japan’s political landscape is undermining the yen. Additionally, concerns about the potential impact of U.S. President-elect Donald Trump’s trade tariffs on Japan’s economy add to the downward pressure on the JPY.
At the same time, expectations that Trump’s expansionary policies could drive up inflation and prompt the Federal Reserve (Fed) to hold back on easing keep U.S. Treasury yields near multi-month highs. This boosts the U.S. dollar (USD) to a fresh year-to-date peak, diverting flows away from the lower-yielding yen. Traders are now focused on the upcoming U.S. Initial Jobless Claims and Producer Price Index (PPI) reports, as fears linger over potential intervention by Japanese authorities to support their currency.
Yen Extends Declines to Multi-Month Low Against the Dollar
- A rise in Japan’s wholesale inflation in October adds to the BoJ’s challenge in determining the timing of a potential rate hike amid domestic economic concerns.
- The Japanese government is reportedly preparing a supplementary budget to fund a stimulus package aimed at supporting low-income households and addressing rising prices.
- Masato Kanda, now a special advisor to Prime Minister Shigeru Ishiba, stated that authorities would act appropriately against excessive foreign exchange market movements.
- U.S. data from Wednesday showed a 0.2% monthly increase in the headline Consumer Price Index (CPI) in October, with a 2.6% rise over the last twelve months.
- Core CPI, which excludes volatile food and energy categories, recorded a 3.3% increase compared to the previous year.
- Despite inflation data, expectations remain that the Fed will deliver a third interest rate cut in December amid a softening labor market.
- The ongoing “Trump trade” trend supports U.S. Treasury yields, which hover near a four-month high, strengthening the U.S. dollar to a new year-to-date high.
- Traders now anticipate the release of U.S. Weekly Initial Jobless Claims and the PPI report for short-term market cues, with Fed Chair Jerome Powell’s upcoming speech expected to influence USD/JPY ahead of Japan’s preliminary Q3 GDP release on Friday.
USD/JPY Breaks Beyond 156.00, Setting Up for Further Near-Term Gains
From a technical standpoint, the recent breakout above the 61.8% Fibonacci retracement level from the July-September decline and a close above the psychological 155.00 level favor bullish traders. Daily chart oscillators remain positive and are not yet in the overbought zone, suggesting that the USD/JPY pair could continue to trend upward. A move beyond the 156.00 level may open the door to a test of resistance around 156.55-156.60, with potential further gains toward the 157.00 level and the 157.30-157.35 supply zone.
On the downside, the Asian session low around 155.35-155.30 is expected to offer immediate support, followed by the key 155.00 mark. A sustained break below this could trigger technical selling, driving USD/JPY toward intermediate support at 154.55-154.50, with additional downside targets around 154.00 and 153.80. A decisive break below 153.45 may shift the near-term bias to favor bearish traders.
