Japanese Yen trims a part of its intraday gains against USD, eyes US GDP for fresh impetus

• The Japanese Yen strengthens for the second straight day and draws support from a combination of factors. 
• A softer risk tone, along with an upward revision of Japan's growth estimates, underpins the safe-haven JPY.
• The BoJ’s dovish stance caps the JPY and limits losses for the USD/JPY pair ahead of the US macro releases.

The Japanese Yen (JPY) trims a part of its intraday gains against the US Dollar (USD) and assists the USD/JPY pair to recover a few pips from the very important 200-day Simple Moving Average (SMA) support. A generally weaker tone around the equity markets benefits the safe-haven JPY, which gets an additional lift after the Japanese government revised its economic growth estimates. That said, the Bank of Japan's (BoJ) decision to maintain its ultra-dovish stance earlier this week keeps a lid on any further gains for the JPY.

The upside for the USD/JPY pair, meanwhile, seems limited in the wake of the Federal Reserve's (Fed) dovish shift last week. Furthermore, growing acceptance that the Fed will start cutting interest rates as early as March 2024 drags the US Treasury bond yields to a multi-month low. The resultant narrowing of the US-Japan rate differential should lend some support to the JPY ahead of the release of Japan's National Core CPI during the Asian session and the US Core Personal Consumption Expenditure (PCE) Price Index on Friday. 

In the run-up to the key inflation figures from Japan and the US, traders on Thursday will take cues from a slew of US macro data – the final Q3 GDP print, the usual Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index. Apart from this, the US bond yields should influence the USD price dynamics and provide some impetus to the USD/JPY pair later during the early North American session. This, along with the broader risk sentiment, will be looked upon to grab short-term trading opportunities on Thursday. 

Daily Digest Market Movers: Japanese Yen struggles to capitalize on intraday gains amid BoJ's dovish stance

• The overnight slump on Wall Street, breaking a nine-day winning streak, is seen as a key factor underpinning the safe-haven Japanese Yen and weighing on the USD/JPY pair.
• Japan's Cabinet Office published its twice-yearly economic outlook and estimated real economic growth rate for fiscal 2023/24 at 1.6%, up from 1.3% seen half a year ago.
• Economic growth projection for the fiscal 2024/25 was also bumped up to 1.3%, slightly higher than the previous estimate of 1.2%, further benefiting the JPY.
• The Bank of Japan's (BoJ) decision earlier this week to stick to its ultra-loose monetary policy settings should keep a lid on any meaningful appreciating move for the JPY.
• The BoJ also made no changes to its dovish policy guidance, while Governor Kazuo Ueda gave no clear hints on the timing of an exit from the negative interest rates policy.
• The uncertainty over the timing of when the Federal Reserve will begin easing, along with Wednesday's upbeat US macro data, lends some support to the US Dollar.
• A slew of influential Fed officials recently tried to downplay bets that the US central bank will completely pivot away from its hawkish stance despite still-elevated inflation.
• The Conference Board reported that the US Consumer Confidence Index surged in December by the most since early 2021, to 110.7 from the downwardly revised 101 a month earlier.
• US Existing Home Sales unexpectedly rose in November, by 0.8% from the prior month to a seasonally adjusted annualized rate of 3.82 million units, ending five straight monthly declines.
• Investors are still pricing in the possibility of an early interest rate cut by the Fed in 2024, dragging the US bond yields to a fresh multi-month low and capping the Greenback.
• Traders now look to the final US Q3 GDP print, which, along with the usual Weekly Jobless Claims and the Philly Fed Manufacturing Index, might provide some impetus.
• The market attention will then turn to the release of the National Core CPI from Japan and the US Core PCE Price Index – the Fed's preferred inflation gauge – on Friday.

Technical Analysis: USD/JPY recovers a few pips from daily low, 200-day SMA holds the key for bulls

From a technical perspective, the recent failures ahead of the 145.00 psychological mark, coinciding with the 38.2% Fibonacci retracement level of the November-December downfall, and the subsequent slide below the 143.00 mark favours bears. That said, it will still be prudent to wait for some follow-through selling below the very important 200-day SMA, currently around the 142.70 region, before positioning for further losses. The USD/JPY pair might then turn vulnerable to accelerate the slide towards the 142.00 mark en route to the 141.75 horizontal support and sub-141.00 levels, or a multi-month low touched last week.

On the flip side, the 143.85 region now seems to act as an immediate strong resistance ahead of the 144.00 level, which if cleared should allow the USD/JPY pair to make a fresh attempt towards conquering the 145.00 mark. Some follow-through buying will suggest that spot prices have formed a near-term bottom and pave the way for a move beyond the mid-145.00s, towards the 146.00 round figure and the 50% Fibo. level, around the 146.40 region.