• The Japanese Yen gains strong positive traction on Thursday and is supported by a combination of factors.
• BoJ Governor Ueda discussed options for a potential pivot from negative interest rates and boosts the JPY.
• A softer risk tone further benefits the safe-haven JPY and exerts heavy downward pressure on USD/JPY.

The Japanese Yen (JPY) catches aggressive bids on Thursday and advances to over a three-month top against the US Dollar (USD) in the wake of firming expectations for an imminent shift in the Bank of Japan’s (BoJ) policy stance. BoJ Governor Kazuo Ueda met Japanese Prime Minister Fumio Kishida and said that his explanation of monetary policy included the wage hike outlook. This, in turn, fueled speculations that a second consecutive year of significant wage hikes will offer an opportunity for the BoJ to consider stepping away from a decade-long monetary stimulus.

This marks a big divergence in comparison to expectations that the Federal Reserve (Fed) is done with its policy-tightening campaign and will start cutting rates in 2024. Apart from this, a generally weaker tone around the equity markets benefits the JPY’s relative safe-haven status. The USD, on the other hand, eases from a two-week high touched on Wednesday and drags the USD/JPY pair further below the 146.00 mark, to its lowest level since early September. Traders now look to the release of the Weekly Initial Jobless Claims data from the US for some impetus later during the North American session.

The market attention will then shift to the final GDP print from Japan on Friday, though the focus will remain glued to the closely-watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday. The aforementioned fundamental backdrop, meanwhile, seems tilted in favour of the JPY bulls and suggests that the path of least resistance for the USD/JPY pair is to the downside.

Daily Digest Market Movers: Japanese Yen strengthens across the board amid bets for a hawkish BoJ pivot

• Signs that a tight US job market is loosening raise concerns about an economic slowdown and weigh on investors’ sentiment, benefitting the safe-haven Japanese Yen.
• The US Labor Department reported Tuesday that job openings declined by 617K to 8.73 million in October, or their lowest level in two-and-a-half-years.
• The ADP report showed that US private-sector employers added just 103K jobs in November, down from the previous month’s downwardly revised 106K.
• The readings reaffirmed market expectations about an imminent shift in the Federal Reserve’s policy stance and bets for a 25 basis points rate cut at the March policy meeting.
• The slew of key US jobs data will continue on Thursday and Friday with the release of Weekly Initial Jobless Claims and the key Nonfarm Payrolls, respectively.
• Israeli forces stormed southern Gaza’s main city on Tuesday in the most intense day of combat of ground operations against Hamas militants, worsening the humanitarian crisis.
• The mixed Trade Balance data from China showed that imports unexpectedly declined by 0.6% in November, fueling concerns about weak domestic demand amid looming recession risks.
• BoJ Governor Ueda told PMI Kishida that the central bank hopes to che whether wages will rise sustainably, whether wage rises will push up service prices and whether demand will be strong.
• Bank of Japan Governor Kazuo Ueda said this Thursday that accommodative monetary policy and stimulus measures are supporting the Japanese economy.
• Ueda added that his explanation of monetary policy to PM Kishida included the wage hike outlook for next year, reaffirming bets that the central bank will move away from negative interest rates regime.
• Ueda earlier said that they have not yet reached a situation in which they can achieve the price target sustainably and stably and with sufficient certainty.

Technical Analysis: USD/JPY refreshes multi-month low, seems vulnerable to slide further

From a technical perspective, this week’s repeated failures to move back above the 100-day SMA support breakpoint, now turned resistance, currently around the 147.45 area, and the subsequent decline favours bearish traders. Moreover, oscillators on the daily chart are holding deep in the negative territory and are still far from being in the oversold zone. This, in turn, validates the near-term negative outlook for the USD/JPY pair.

Furthermore, a break below the 38.2% Fibonacci retracement level of the July-October rally could be seen as a fresh trigger for bearish traders and supports prospects for further losses. Some follow-through selling below the 146.00 mark could then drag the USD/JPY pair to the 145.45-145.40 intermediate support en route to the 145.00 psychological mark and the 50% Fibo. level, around the 144.55-144.50 region.

On the flip side, the 146.70 area now seems to act as an immediate hurdle. Any further move up might continue to attract fresh sellers and run out of the steam near the 100-day SMA barrier. That said, a sustained strength beyond might trigger a short-covering rally and allow spot prices to reclaim the 148.00 mark. Any further move up, however, is likely to confront stiff barrier and remain capped near the 148.30-148.40 region. A sustained strength beyond the latter will suggest that the recent pullback from the 152.00 neighbourhood has run its course and shift the bias in favour of bullish traders.

Japanese Yen price today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the New Zealand Dollar.