• USD/JPY attracts some buying on Wednesday, though the uptick lacks bullish conviction.
  • Bets for less aggressive rate hikes continue to weigh on the USD and cap gains for the pair.
  • The downside seems limited amid the Fed-BoJ policy divergence, ahead of FOMC minutes.

The USD/JPY pair reverses an intraday dip to sub-141.00 levels and bounces over 50 pips from the daily low. Spot prices, however, struggle to capitalize on the move and meet with a fresh supply near the 141.50 level amid the prevalent selling bias surrounding the US Dollar.

Despite the recent hawkish comments by several Fed officials, investors now seem convinced that the US central bank will slow the pace of its policy tightening. In fact, the current market pricing indicates a greater chance of a relatively smaller 50 bps rate hike at the next FOMC policy meeting in December. This, in turn, has been a key factor behind the recent sharp pullback in the US Treasury bond yields and continues to act as a headwind for the greenback.

The Fed, however, is still far from pausing its rate-hiking cycle and is expected to continue raising borrowing costs to curb inflation. This should limit the downside for the US bond yields and lend some support to the buck. Hence, the market focus will remain glued to the release of the November FOMC meeting minutes, due later during the US session. Investors will look for clues about future rate hikes, which will influence the near-term USD price dynamics.

In the meantime, a more dovish stance adopted by the Bank of Japan (BoJ), along with signs of stability in the equity markets, could undermine the safe-haven Japanese Yen and offer support to the USD/JPY pair. In fact, BoJ, so far, has shown no inclination to hike interest rates. Moreover, BoJ Governor Haruhiko Kuroda reiterates last week that the central bank will stick to its monetary easing to support the economy and achieve the 2% inflation target in a stable fashion.

This marks a big divergence in comparison to the Fed and supports prospects for the emergence of some buying around the USD/JPY pair at lower levels. Even from a technical perspective, Monday's sustained move back above the 100-day SMA resistance, around the 141.00 mark, confirmed a breakout through a one-week-old trading range. This adds credence to the positive outlook and warrants some caution before positioning for any meaningful depreciating move, at least for now.

Technical levels to watch

USD/JPY

Overview
Today last price 141.31
Today Daily Change 0.10
Today Daily Change % 0.07
Today daily open 141.21
 
Trends
Daily SMA20 144.03
Daily SMA50 145.01
Daily SMA100 141.08
Daily SMA200 133.6
 
Levels
Previous Daily High 142.24
Previous Daily Low 141.08
Previous Weekly High 140.8
Previous Weekly Low 137.67
Previous Monthly High 151.94
Previous Monthly Low 143.53
Daily Fibonacci 38.2% 141.53
Daily Fibonacci 61.8% 141.8
Daily Pivot Point S1 140.78
Daily Pivot Point S2 140.35
Daily Pivot Point S3 139.62
Daily Pivot Point R1 141.94
Daily Pivot Point R2 142.67
Daily Pivot Point R3 143.1

 

 

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