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Japanese Yen sticks to modest recovery gains against softer USD; lacks bullish conviction

  • The Japanese Yen gains positive traction amid intervention fears and the risk-off mood.
  • Fiscal concerns and BoJ uncertainty might keep a lid on any further upside for the JPY.
  • Reduced Fed rate cut bets could act as a tailwind for the USD and the USD/JPY pair.

The Japanese Yen (JPY) sticks to modest recovery gains heading into the European session and drags the USD/JPY pair away from its highest level since February, touched earlier this Tuesday. The recent fall in the JPY prompted some verbal intervention from Japan’s Finance Minister Satsuki Katayama. This, along with the prevalent risk-off mood, provides a modest lift to the safe-haven JPY. Apart from this, the lack of follow-through US Dollar (USD) buying keeps the USD/JPY pair depressed near the 155.00 psychological mark.

Meanwhile, reports that Japan's Prime Minister Sanae Takaichi plans tax cuts to boost consumption add to concerns about the government's long-term fiscal health. Adding to this, Japan's weak Q3 GDP print could put pressure on the Bank of Japan (BoJ) to delay raising interest rates, which acts as a headwind for the JPY. Moreover, less dovish Federal Reserve (Fed) expectations support the buck and the USD/JPY pair. Traders also seem reluctant ahead of the FOMC Minutes and the delayed US Nonfarm Payrolls (NFP) report this week.

Japanese Yen draws support from intervention fears, weaker risk tone

  • Nikkei Asia reported late Monday that Japan's Prime Minister Sanae Takaichi will launch tax-reform talks this week, aiming to cut certain taxes to stimulate investment and consumption while raising others and eliminating breaks to fill the fiscal hole.
  • The report added that the ruling Liberal Democratic Party (LDP) and its coalition partner will discuss next year’s tax package, including the agreed-upon removal of gasoline and diesel surcharges, a move that will leave a ¥1.5 trillion revenue gap.
  • Government data released on Monday showed that Japan's economy contracted for the first time in six quarters during the July-September period. This tempers bets that the Bank of Japan will hike rates soon amid increasing political resistance.
  • Japan’s Finance Minister Satsuki Katayama said at a regular news conference this Tuesday that we have been alarmed by the recent one-sided, rapid moves in the foreign exchange market, fueling speculations about government intervention.
  • In fact, Katayama added that the government will thoroughly monitor for excessive fluctuations and disorderly movements in the forex market, with a high sense of urgency, which holds back traders from placing fresh bearish bets around the JPY.
  • Several Fed officials recently signaled caution on further monetary easing amid the lack of economic data, forcing investors to scale back their expectations for a rate cut in December. This acts as a tailwind for the US Dollar and the USD/JPY pair.
  • The USD bulls, however, seem reluctant and opt to wait for more cues about the Fed's rate-cut path. Hence, the market focus will remain glued to the FOMC Minutes on Wednesday and the delayed US Nonfarm Payrolls report on Thursday.
  • In the meantime, traders will scrutinize speeches from influential FOMC members later this Tuesday, which should continue to play a key role in driving the USD demand and producing short-term trading opportunities around the USD/JPY pair.

USD/JPY could attract buyers near 154.50-154.45 resistance breakpoint

From a technical perspective, the overnight close above the 155.00 psychological mark could be seen as a fresh trigger for the USD/JPY bulls. Furthermore, oscillators on the daily chart are holding in positive territory and are still away from being in the overbought zone, suggesting that the path of least resistance for spot prices remains to the upside. Hence, some follow-through strength beyond the 155.60-155.65 intermediate hurdle, towards reclaiming the 156.00 round figure, looks like a distinct possibility.

On the flip side, any corrective pullback below the 155.00 mark is more likely to find decent support and attract fresh buyers near the 154.50-154.45 region. The latter should act as a key pivotal point, which, if broken decisively, might prompt some technical selling and drag the USD/JPY pair to the 154.00 round figure. The downfall could extend further towards the next relevant support near the 153.60-153.50 region en route to the 153.00 mark.

Japanese Yen Price Today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Australian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.06%0.04%-0.09%0.02%0.26%0.12%-0.28%
EUR0.06%0.09%-0.02%0.08%0.32%0.18%-0.23%
GBP-0.04%-0.09%-0.12%-0.01%0.22%0.09%-0.32%
JPY0.09%0.02%0.12%0.09%0.33%0.18%-0.21%
CAD-0.02%-0.08%0.01%-0.09%0.24%0.10%-0.30%
AUD-0.26%-0.32%-0.22%-0.33%-0.24%-0.14%-0.54%
NZD-0.12%-0.18%-0.09%-0.18%-0.10%0.14%-0.41%
CHF0.28%0.23%0.32%0.21%0.30%0.54%0.41%

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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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