USD/JPY Price Analysis – Dec 05, 2024
Daily Price Outlook
During the European session, the USD/JPY currency pair has been experiencing a bearish trend, with the Japanese Yen (JPY) building on its intraday gains amid the growing expectations that the Bank of Japan (BoJ) may deliver an interest rate hike in December.
Moreover, the ongoing geopolitical tensions, especially in Ukraine, and concerns about the US President-elect Donald Trump's potential tariff plans have driven some safe-haven flows towards the Yen.
US Dollar and its Impact on the USD/JPY Pair
On the US front, the recent dip in US Treasury yields has put some pressure on the USD, although the downside has been relatively contained. The 10-year US Treasury bond yield recently fell to its lowest level since October 21, which has made the USD less attractive to investors.
However, despite this downward pressure, Federal Reserve officials remain optimistic about the economy. Fed Chair Jerome Powell noted that the central bank may adopt a more cautious approach to further rate cuts.
Additionally, other Federal Reserve members, including St. Louis Fed President Alberto Musalem and San Francisco Fed President Mary Daly, emphasized that more work is needed to bring inflation down to the 2% target.
These comments suggest that the Fed might not rush into rate cuts, which could provide some support for the USD.
These comments are fueling speculation that the Federal Reserve could pause its rate cuts at the upcoming meetings, potentially supporting the USD in the medium term.
The latest economic data, including the ISM Services PMI's weaker-than-expected performance, adds to the complexity of the situation.
As a result, traders will continue to monitor the upcoming Nonfarm Payrolls report for more insights into the US economy, which could sway the USD and, in turn, the USD/JPY pair's direction.
Japanese Yen Attracts Fresh Buyers Amid BoJ Rate Hike Speculation
The Japanese Yen has recently seen increased demand due to wavering expectations surrounding a potential rate hike by the Bank of Japan (BoJ) in December. Last week, BoJ Governor Kazuo Ueda's hawkish comments fueled speculation that the central bank could act sooner than expected, supporting the Yen.
However, BoJ board member Toyoaki Nakamura's recent dovish remarks, stating concerns about the sustainability of wage growth and inflation, have dampened the likelihood of an immediate rate hike.
Despite this, the strong Tokyo Consumer Price Index for November continues to raise the chances of further tightening in Japan's monetary policy, especially with inflation not yet at the targeted 2% level.
Furthermore, investors are increasingly concerned that US President-elect Trump's tariff plans could escalate global trade conflicts, which would further drive uncertainty and bolster demand for the Yen as a defensive asset.
These factors combined have led to fresh buying interest in the Yen, pushing the USD/JPY pair lower as the outlook for the BoJ’s policy remains in flux.
This uncertainty, along with the market's focus on Japan's economic recovery, is likely to keep the USD/JPY pair volatile in the short term. (edited)
USD/JPY – Technical Analysis
USD/JPY is trading at 149.81, down 0.48% during the session, reflecting bearish sentiment as the pair hovers below its pivot point at 150.76. Immediate resistance is located at 152.00, with additional barriers at 153.36 and 154.73.
On the downside, support is at 148.83, followed by key levels at 147.72 and 146.67, marking critical zones for potential bearish extensions.
Technical indicators suggest bearish momentum in the near term. The RSI stands at 42, highlighting a lack of upward momentum and a tilt toward oversold conditions.
The 50-day EMA, positioned at 150.02, aligns with the pivot point, acting as a dynamic resistance level. Failure to reclaim the pivot point could reinforce downward pressure, increasing the likelihood of a retest of lower support levels at 148.83.
The broader trend appears influenced by Federal Reserve policy expectations and yen-specific fundamentals, including intervention risks.
A break below 150.427 supports a bearish outlook, targeting 148.806, with a stop-loss set at 151.429 for risk management. Conversely, a sustained recovery above 152.00 may signal a reversal, though current market conditions suggest limited upside potential.
Traders should monitor macroeconomic developments and market sentiment closely as the pair consolidates near critical levels. The immediate bias remains bearish, with short positions recommended below 150.427.
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