Japanese Yen Weakens Against USD, Hovering Near Weekly Lows
The Japanese Yen (JPY) continues to face selling pressure against the US Dollar (USD), with the USD/JPY pair rebounding strongly from its weekly lows during Wednesday’s Asian session. A combination of fading safe-haven demand and ambiguity surrounding the Bank of Japan’s (BoJ) monetary policy decisions has undermined the JPY, while the USD finds support in robust Treasury yields and market optimism.
Key Factors Driving USD/JPY Movements
- Safe-Haven Demand Fades:
Despite risks stemming from the Russia-Ukraine conflict, easing fears of a nuclear escalation have tempered demand for safe-haven currencies like the JPY. Russia’s assurances of avoiding nuclear conflict and restrained responses from global powers have calmed investor nerves. - BoJ Uncertainty:
Bank of Japan Governor Kazuo Ueda signaled potential interest rate hikes earlier this week but offered no concrete timeline. This lack of clarity has left the JPY vulnerable, even as Japan’s trade data showed a ¥461.2 billion deficit for October. - US Treasury Yields and Fed Outlook:
Rising US Treasury yields, fueled by expectations of a less aggressive Federal Reserve easing policy, have bolstered the USD. Comments from Fed officials hinting at tighter monetary controls to combat inflation have further supported the greenback. - Market Optimism Post-Elections:
Former President Donald Trump’s anticipated economic policies, including potential deregulation and fiscal spending, have raised inflation expectations. This has added momentum to USD strength while keeping the JPY under pressure.
Technical Analysis: USD/JPY Poised for Further Gains
Upside Outlook:
- Sustained strength above 155.00 could attract fresh bullish bets.
- Key resistance levels:
- 155.35 (weekly top)
- 155.70 (intermediate hurdle)
- 156.75 (multi-month high from last Friday)
Downside Support:
- Immediate support lies near 154.40-154.35, with stronger floors at:
- 154.00
- 153.30-153.25 (overnight swing low)
- 151.90-151.85 (200-day SMA)
Conclusion: USD/JPY Eyes Multi-Month High
The USD/JPY pair’s rebound from weekly lows suggests that its recent corrective dip may have concluded. Positive technical indicators align with a potential retest of multi-month highs, with support levels providing a cushion against sharp declines. As market participants watch speeches from influential FOMC members, the USD/JPY pair remains poised for further upside in the near term.