Japanese Yen stands firm near weekly top against weaker USD; seems poised to climb further
- The Japanese Yen scales higher against a weaker USD for the third straight day on Wednesday.
- The hawkish BoJ Minutes, along with geopolitical uncertainties, underpin the safe-haven JPY.
- Rising Fed rate cut bets weigh on the USD and exert additional pressure on the USD/JPY pair.
The Japanese Yen (JPY) prolongs its uptrend against a broadly weaker US Dollar (USD) for the third successive day and sticks to gains near the weekly top through the early European session on Wednesday. Minutes of the Bank of Japan's (BoJ) October meeting showed that board members debated the need to continue raising interest rates. Apart from this, geopolitical uncertainties stemming from rising US-Venezuela tensions, the protracted Russia-Ukraine war, and the risk of a renewed Israel-Iran conflict contribute to safe-haven JPY's outperformance.
Meanwhile, the BoJ's hawkish outlook marks a significant divergence compared to rising bets for further policy easing by the US Federal Reserve (Fed). The latter drags the US Dollar (USD) to its lowest level since early October and assists the lower-yielding JPY to reverse last Friday's post-BoJ downfall. However, the upbeat market mood limits further gains for the JPY, though the fundamental backdrop seems tilted firmly in favor of the JPY bulls. This, in turn, backs the case for further depreciation of the USD/JPY pair amid the year-end thin liquidity conditions.
Japanese Yen bulls have the upper hand amid BoJ-Fed policy divergence
- Minutes of the Bank of Japan's October meeting, released earlier this Wednesday, showed that board members agreed that the central bank will continue raising interest rates if economic price forecasts materialize. At the subsequent meeting in December, the central bank raised the policy rate to 0.75%, or a 30-year high, and left the door open to further tightening.
- Moreover, tensions linked to the United States' actions against vessels carrying Venezuelan oil, along with Russia's escalation of attacks on Ukraine and a potential new Israel-Iran war, underpin the safe-haven Japanese Yen for the third consecutive day. Apart from this, the prevalent US Dollar selling bias drags the USD/JPY pair to a fresh weekly low on Wednesday.
- The USD Index (DXY), which tracks the Greenback against a basket of currencies, has declined to a fresh low since early October amid rising bets for two more rate cuts by the Federal Reserve in 2026. Moreover, US President Donald Trump declared that the candidate for the role of the Fed Chair must commit to lowering rates even when the economy is performing well.
- This overshadows Tuesday's upbeat US GDP growth figures, which showed that the economy expanded at a 4.3% annualized pace during the July–September period. The reading was stronger than consensus estimates and the 3.8% rise recorded in the previous quarter, though it does little to provide any respite to the USD bulls or help ease the prevalent selling bias.
- Separately, the US Census Bureau reported that Durable Goods Orders declined 2.2% in October, following the 0.7% increase recorded in the previous month and worse than the market expectation for a decrease of 1.5%. Furthermore, a sharp fall in consumer confidence in December suggested that households are becoming much more cautious about the future.
- Traders now look forward to Wednesday's release of the US Initial Weekly Jobless Claims, which might influence the USD and provide some impetus to the USD/JPY pair later during the North American session. The focus, however, will remain glued to Friday's release of the Tokyo CPI report, which could play a key role in driving the JPY demand in the near term.
USD/JPY technical setup backs the case for an extension of the weekly downtrend
The USD/JPY pair has now reversed the post-BoJ strong move up back closer to the November swing high. Moreover, the weekly downtrend from the vicinity of the 158.00 mark constitutes the formation of a bearish double-top pattern and validates the negative outlook for spot prices.
Meanwhile, the Moving Average Convergence Divergence (MACD) line sits below the Signal line just under the zero mark, while a slightly deeper negative histogram hints at building bearish momentum. The RSI stands at 50 (neutral) after easing from recent highs, reinforcing a wait-and-see stance.
This, in turn, suggests that the USD/JPY pair's downfall could stall near the 155.00 psychological mark. This is followed by the 154.55-154.50 horizontal zone, which should act as the neckline support of the bearish pattern. A convincing break below will be seen as a key trigger for bearish traders and pave the way for deeper losses.
(The technical analysis of this story was written with the help of an AI tool)
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.67% | -0.97% | -1.23% | -0.82% | -1.55% | -1.74% | -0.96% | |
| EUR | 0.67% | -0.29% | -0.59% | -0.16% | -0.88% | -1.08% | -0.28% | |
| GBP | 0.97% | 0.29% | -0.19% | 0.13% | -0.59% | -0.79% | 0.02% | |
| JPY | 1.23% | 0.59% | 0.19% | 0.44% | -0.27% | -0.47% | 0.19% | |
| CAD | 0.82% | 0.16% | -0.13% | -0.44% | -0.65% | -0.91% | -0.12% | |
| AUD | 1.55% | 0.88% | 0.59% | 0.27% | 0.65% | 0.10% | 0.61% | |
| NZD | 1.74% | 1.08% | 0.79% | 0.47% | 0.91% | -0.10% | 0.81% | |
| CHF | 0.96% | 0.28% | -0.02% | -0.19% | 0.12% | -0.61% | -0.81% |
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
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
