USD/JPY - Off 4-week high, but downside could be limited ahead of the Fed

USD/JPY has faded the spike to a 4-week high.
Downside limited on Fed rate hike bets.

Omkar Godbole FXStreet Contributor

US wage growth did disappoint expectations on Friday, still, the USD/JPY clocked to a 4-week high in early Asia as strong hiring reinforced expectations of a third Fed rate hike this year.

The currency pair rose to 113.63; the highest level since Nov. 14. At the time of writing, it was trading at 113.50 levels.

The non-farm payrolls released on Friday showed the economy added 228,000 jobs in November, beating the expected figure of 195,000. Meanwhile, average hourly wages rose 2.5 percent on the year, up from 2.4 percent previously, but missing forecasts of 2.7 percent. Despite the weak wage growth numbers, the greenback ended the last week higher against all of the major currencies and could retain the bid tone as the Fed is expected to hike rates by 25 basis points this Wednesday.

However, the bid tone around the Yen could strengthen as speculation is gathering pace that the BOJ is likely to cut its ETF Purchases soon.

BOJ - Harpooning the ETF Whale?

The Bank of Japan (BOJ) could cut its annual buying target for domestic exchange-traded funds by as much as a third of the current 6 trillion yen ($53 billion), says a Bloomberg report. That said, the BOJ would still remain the most stimulative central bank in the world. Hence, the downside in the USD/JPY could be limited.

USD/JPY Technical Outlook

Jim Langlands from FX Charts writes - "US$Jpy finished the week on a positive note, assisted by a minor uptick in US yields (US10Y – 2.377%) and still looks pretty firm on all fronts, so trading from the long side is preferred.

1 hour/4 hour indicators: Turning higher

Daily Indicators: Turning higher

Weekly Indicators: Neutral

Preferred Strategy: With the momentum indicators aligning higher, a test of 113.80 would not surprise, beyond which 114.00/05 will see sellers ahead of a possible towards 114.30 and even 114.75. Look to buy dips towards 113.00/10 with a SL placed sub 112.80."

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD shifts its attention to 1.1900 and above

EUR/USD has shaken off Tuesday’s dip, pushing back beyond the 1.1800 mark amid decent gains as Wednesday’s session draws to a close. The rebound is largely driven by a modest pullback in the US Dollar, as markets digest the aftermath of President Trump’s SOTU speech and continue to monitor trade-related headlines and signals from the White House.

GBP/USD challenges multi-day highs near 1.3530

GBP/USD leaves behind the previous day’s decline and regains fresh upside traction on Wednesday, surpassing the 1.3500 barrier in a context of a modest decline in the Greenback and a generalised improved mood in the risk-linked space. Meanwhile, the US tariff narrative continues to dictate the mood among market participants after Presidet Trump’s SOTU speech failed to surprise markets.

Gold remains bid and close to $5,200

Gold buyers are returning to the fold on Wednesday, targeting the $5,200 area and possibly beyond, after Tuesday’s corrective dip from monthly highs. The rebound in the precious metal comes as the US Dollar loses traction, with Trump’s SOTU speech offering little fresh direction and AI-related nerves continuing to ease.

UK financial watchdog advances stablecoin oversight as four firms pilot issuance

The Financial Conduct Authority (FCA) in the United Kingdom (UK) is advancing toward the final stablecoin regulatory framework with a pilot program involving four companies, including Monee, Financial Technologies ReStabilise, Revolut and VVTX.

Nvidia earnings to influence AI trade and broader market sentiment

For the last three years, Nvidia has been the engine of the AI boom, and now Wall Street is watching to see whether that momentum can keep going. High-growth stocks have been struggling to maintain their bullish trend in 2026.

Cosmos Hub Price Forecast: ATOM rebounds slightly, bearish outlook remains intact

Cosmos Hub (ATOM) price rebounds, trading above $2.05 at the time of writing on Wednesday, after undergoing a sharp correction since last week. Weakening on-chain and derivatives data support a bearish outlook, while technical analysis remains unfavorable.