Japanese Yen extends its consolidative price move against USD, eyes US data for fresh impetus
- The Japanese Yen continues to be underpinned by expectations for a hawkish BoJ pivot in 2024.
- Fed rate cut bets drag the USD to over a four-month low and act as a headwind for USD/JPY.
- The risk-on mood might cap the JPY and limit losses for the pair ahead of the flash global PMIs.
The Japanese Yen (JPY) reverses intraday losses and trades near the top end of its intraday range against the US Dollar (USD) during the first half of the European session on Friday. Growing acceptance that the Bank of Japan (BoJ) may exit the negative rate policy early next year continues to act as a tailwind for the JPY. The USD, on the other hand, plunges to over a four-month low in the wake of the Federal Reserve's (Fed) dovish pivot earlier this week. This, in turn, prompts fresh selling around the USD/JPY pair, reaffirming the recent breakdown through a technically significant 200-day Simple Moving Average (SMA).
That said, the upbeat US macro data released on Thursday, against the backdrop of last week's stronger-than-expected US jobs report, tempered expectations for an early interest rate cut by the Fed in March 2024. This leads to a modest recovery in the US Treasury bond yields, which, along with the prevalent risk-on environment, keeps a lid on any meaningful appreciating move for the safe-haven JPY and might help limit losses for the USD/JPY pair. Nevertheless, remains on track to end deep in the red for the fifth successive week and well within the striking distance of a multi-month trough touched the previsous day.
Daily Digest Market Movers: Japanese Yen is underpinned by hopes for a BoJ pivot, bearish USD
- The US Census Bureau reported on Thursday that Retail Sales rose 0.3% in November as compared to a 0.1% fall expected, underscoring resilient consumer spending despite higher borrowing costs.
- Moreover, Core Retail Sales, which excludes automobiles, also surpassed consensus estimates for a 0.1% decline and increased by 0.2% last month, while Retail Sales Control Group increased 0.4%.
- A separate report showed that Initial Jobless Claims fell to 202K during the week ended December 9, registering the lowest level since mid-October, and providing evidence of a still strong labor market.
- The upbeat US macro data cast doubts on expectations for an early interest rate cut by the Federal Reserve, as early as March 2024, forcing traders to take some profits off their US Dollar bearish bets.
- The au Jibun Bank flash Japan Manufacturing PMI shrank for the seventh straight month and dropped from 48.3 previous to 47.7 in December, marking the fastest deterioration in 10 months.
- The au Jibun Bank flash Services PMI recorded the fastest gain in three months and expanded to 52.0 in December from 50.8 previous, while the composite PMI expanded slightly to 50.4 from 49.6.
- Meanwhile, the prevalent risk-on environment is seen undermining the safe-haven Japanese Yen, though expectations for a shift in the Bank of Japan's policy stance should help limit further losses.
- The latest Reuters poll show that 84% of economists see the BoJ to end negative interest rates in 2024 and 21% see the central bank to begin unwinding its ultra-loose monetary policy setting in January.
- The benchmark 10-year US government bond yield remains below 4% or its lowest level since August, and the yield on the rate-sensitive two-year Treasury note languishes near its weakest level since July.
- The resultant narrowing of the US-Japan rate differential, along with the divergent Fed-BoJ policy expectations, might continue to act as a tailwind for the JPY and cap gains for the USD/JPY pair.
Technical Analysis: USD/JPY hangs near multi-month low, remains vulnerable to slide further
From a technical perspective, the Relative Strength Index (RSI) on the daily chart is still holding in the oversold territory and prompts some short-covering on the last day of the week. That said, the overnight sustained break and acceptance below the 200-day Simple Moving Average (SMA) favours bearish traders. Hence, any subsequent move back above the said support breakpoint, turned resistance, currently around mid-142.00s, might still be seen as a selling opportunity near the 142.75-142.80 region. This, in turn, should cap the USD/JPY pair near the 143.00 round figure. That said, a sustained strength beyond the latter could allow spot prices to reclaim the 144.00 mark.
On the flip side, the 142.00 round figure now seems to protect the immediate downside ahead of the 141.40-141.35 region. Some follow-through selling might expose the multi-month low, around the 140.95 area touched on Thursday, below which the USD/JPY pair is likely to accelerate the downfall further towards the 140.00 psychological mark.
(This story was corrected on December 15 at 10:48 GMT to say, in the first bullet point, that the Japanese Yen continued to be underpinned, not undermined, by expectations of a BoJ hawkish policy pivot.)
Japanese Yen price this week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -1.89% | -1.60% | -1.50% | -1.95% | -2.14% | -1.50% | -1.39% | |
| EUR | 1.85% | 0.26% | 0.35% | -0.09% | -0.27% | 0.33% | 0.49% | |
| GBP | 1.59% | -0.28% | 0.10% | -0.33% | -0.53% | 0.10% | 0.21% | |
| CAD | 1.48% | -0.37% | -0.11% | -0.45% | -0.64% | -0.02% | 0.12% | |
| AUD | 1.91% | 0.08% | 0.33% | 0.44% | -0.20% | 0.42% | 0.57% | |
| JPY | 2.10% | 0.23% | 0.43% | 0.65% | 0.15% | 0.60% | 0.75% | |
| NZD | 1.48% | -0.34% | -0.08% | 0.02% | -0.43% | -0.61% | 0.14% | |
| CHF | 1.37% | -0.47% | -0.23% | -0.13% | -0.57% | -0.76% | -0.14% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Economic Indicator
United States S&P Global Composite PMI
The S&P Global Composite Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging US private-business activity in the manufacturing and services sector. The data is derived from surveys to senior executives. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the private economy is generally expanding, a bullish sign for the US Dollar (USD). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for USD.
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Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
