USD/JPY hangs near daily low, bears flirt with 200-hour SMA support near 147.00 mark

The USD/JPY pair comes under some selling pressure during the Asian session on Thursday and snaps a two-day winning streak to the weekly high, around the 147.75 region touched the previous day. Spot prices drop to the 147.00 mark, or a fresh daily low in the last hour, with bears now awaiting a sustained break and acceptance below the 200-hour Simple Moving Average (SMA) before positioning for any further losses.

The Japanese Yen (JPY) is underpinned by speculations that the Bank of Japan (BoJ) will end its ultra-easy monetary policy, which, in turn, is seen as a key factor weighing on the USD/JPY pair. In fact, the markets are now betting that the central bank may scrap its yield-curve control (YCC) policy and put an end to negative interest rates as early as this year, especially after the BoJ Governor Kazuo Ueda's hawkish comments over the weekend.

In an interview with Yomiuri newspaper, Ueda signalled that hiking interest rate is among the options available if the BoJ becomes confident that prices and wages will keep going up sustainably. This, in turn, triggered a sell-off in the Japanese government bonds (JGB) and pushed the yield on the benchmark 10-year JGB to its highest level since January 2014 on Tuesday, which continues to act as a tailwind for the JPY.

Apart from this, the emergence of some US Dollar (USD) selling, amid the uncertainty over the Federal Reserve's (Fed) future rate-hike path, contributes to the offered tone surrounding the USD/JPY pair. The US consumer inflation figures released on Wednesday ensured that the Fed will keep rates steady at its policy meeting next week. The still-sticky inflation, however, keeps hopes for one more lift-off by the end of this year.

The current market pricing indicates a more than 50% chance of a 25 basis points (bps) lift-off either in November or December. This, in turn, might hold back the USD bears from placing aggressive bearish and help limit losses for the USD/JPY pair. Traders now look to the US economic docket – featuring the release of the usual Weekly Initial Jobless Claims, the Producer Price Index (PPI) and monthly Retail Sales – for a fresh impetus.

Technical levels to watch