Yen Soars: BoJ Uncertainty and Weakening Dollar in Focus

Discover why the Yen soars amid BoJ uncertainty and a weakening Dollar. Explore critical factors shaping the market dynamics.

News and analysis on USD/JPY

• Bank of Japan (BoJ) Deputy Governor Himino highlights benefits of ending ultra-loose monetary policy; USD/JPY consolidates ahead of Friday’s NFP print.
• Major risk events: US services PMI and NFP data, Japan GDP Q3 (final).

Yen Soars: BoJ Uncertainty and Weakening Dollar in Focus

BoJ Officials Downplay Imminent Decisions on Policy Pivot

Recent statements from Bank of Japan (BoJ) officials emphasize the uncertainty surrounding when the BoJ might withdraw from decades of ultra-loose monetary policy despite inflation surpassing the 2% target for over a year.

BoJ Governor Kazuo Ueda underscores the importance of inflation determinants shifting from supply-side shocks to more demand-driven effects. Key focus areas include stable and consistent inflation above the 2% target and sufficient wage growth. Wage negotiations will begin early next year following 2023’s revelation of the fastest salary growth in years.

The possibility of a policy pivot from the BoJ supports the Yen, aided by a weaker dollar as economic data softens and inflation improves. Markets increasingly anticipate US rate cuts, lowering borrowing costs and overall financial conditions. US yields are declining faster than in Japan, providing relative support for the Yen.

USD/JPY Consolidates Before Major US Jobs Data

In October, US Nonfarm Payrolls (NFP) suggested a potential easing in the job market, with only 150k new jobs added. While NFP numbers have declined, they remain above zero, highlighting resilience in the labor market. Recent weeks have seen lower NFP, CPI, growth, and sentiment data, weighing on the dollar. However, an estimated 180k jobs for November could challenge further USD selling. Keep an eye on the unemployment figure, which will remain unchanged at 3.9%, but a surprise to the upside could impact the dollar, reaching the 4% mark.

The current support level is at 146.50, where price action seems content to trade while anticipating the next catalyst. Given the focus on US jobs this week, watch for ADP private payrolls data, especially after the JOLTs report registered fewer job openings than expected in November. In a bearish continuation, the next support level is 145 flat. Upside markets have a 50-day simple moving average and the 150 mark.

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