1. Japanese Yen’s Third Consecutive Appreciation Against USD
The Japanese Yen (JPY) continues its upward trend against the US Dollar (USD) for the third consecutive day, reflecting the impact of divergent monetary policies between the Bank of Japan (BoJ) and the Federal Reserve (Fed). Japan’s inflation data indicates progress towards sustained inflation increases, prompting speculation of a potential shift in the BoJ’s ultra-dovish stance in 2024.
2. Fed’s Divergent Policy: USD Falls to Multi-Month Low
Conversely, investors appear convinced that the Federal Reserve (Fed) has concluded its interest rate hikes and may initiate policy easing in the first half of 2024. This conviction drags the USD Index (DXY) to a nearly three-month low, contributing to the Yen’s strength. Concerns about a global economic downturn further bolster the safe-haven status of the JPY, applying downward pressure on the USD/JPY pair.
3. Equity Market Positivity and USD/JPY Dynamics
Despite the downward pressure on the USD/JPY pair, a generally positive tone in equity markets helps maintain spot prices above the 148.00 mark as the European session approaches. Traders eagerly await the release of the Conference Board’s Consumer Confidence Index from the United States and speeches by influential Federal Open Market Committee (FOMC) members, which could drive USD demand and impact the USD/JPY pair later during the North American session.
4. Japanese Economic Indicators and BoJ Speculations
Government data from Japan indicates that both the nationwide headline and core Consumer Price Index (CPI) remain above the Bank of Japan’s 2% target for the 19th consecutive month in October. Additionally, a surge in Japan’s wholesale services inflation, fueled by a tight job market, sparks speculations that the BoJ might end its negative interest rate policy in 2024. The Services Producer Price Index (PPI) shows acceleration, rising to 2.3% in October from a year earlier.
5. USD’s Multi-Month Low and Fed’s Policy Direction
The US Dollar experiences a fresh multi-month low amid the growing acceptance that the Federal Reserve has ceased raising rates and may consider easing policy as early as March 2024. Despite the downward pressure on the USD/JPY pair for the third successive day, a positive risk tone prevents bearish traders from placing fresh bets.
6. Technical Analysis and Support/Resistance Levels
From a technical standpoint, a sustained break below the 148.00 round figure could expose the 100-day Simple Moving Average (SMA) near the 147.90-147.85 zone. This break might trigger bearish momentum, leading to deeper losses toward the monthly low around the 147.15 area. On the upside, immediate resistance is noted near the 148.80 region, with further levels at 149.00 and the weekly peak around 149.65. A strong move beyond these levels could lift the USD/JPY pair beyond the psychological mark of 150.00.