CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

• The USD/JPY pair extends the overnight turnaround from over a one-week low. 
• Fading safe-haven demand, along with the BoJ uncertainty, undermines the JPY. 
• Bets for a less aggressive Fed easing lend some support to the USD and the pair.

The Japanese Yen (JPY) witnessed good two-way price moves on Tuesday and ended the day nearly unchanged against its American counterpart. Russia's announcement that it would lower its threshold for a nuclear strike drove some haven flows towards the JPY. The global flight to safety triggered a sharp fall in the US Treasury bond yields and further benefited the lower-yielding JPY, dragging the USD/JPY pair to over a one-week low, around the 153.30-153.25 region. The initial market reaction, however, faded rather quickly after comments from Russian and US officials helped ease market concerns about the onset of a full-blown nuclear war. 

Adding to this, the uncertainty over the timing of further monetary policy tightening by the Bank of Japan (BoJ) continued to undermine the JPY and, to a larger extent, overshadowed a modest US Dollar (USD) weakness. The JPY remains depressed following the release of Trade Balance data from Japan and assists the USD/JPY pair to build on the overnight solid intraday recovery of over 150 pips. That said, speculations that Japanese authorities might intervene in the FX market to prop up the domestic currency, coupled with geopolitical uncertainties, might hold back the JPY bears from placing aggressive bets and act as a headwind for the pair. 

Japanese Yen bears look to seize back control amid fading safe-haven demand, BoJ uncertainty

• Russian President Vladimir Putin approved the change to the country's nuclear doctrine on Tuesday, days after US President Joe Biden authorized Ukraine to use long-range American missiles against military targets inside Russia.
• Russian Foreign Minister Sergei Lavrov said the country would do everything possible to avoid the onset of a nuclear war and called Germany's decision on Monday not to provide long-range missiles to Ukraine a responsible position.
• Meanwhile, the White House said that the United States (US) does not plan to adjust its own nuclear posture in response to Russia's move, which, in turn, tempered safe-haven demand and weighed on the Japanese Yen. 
• Bank of Japan Governor Kazuo Ueda earlier this week warned against keeping borrowing costs too low and signaled another interest rate increase, was vague on the timing and offered no hints about a hike in December.
• A report published by the Ministry of Finance earlier this Wednesday showed that Japan's total exports increased by 3.1% and imports grew by 0.4% from a year earlier in October, resulting in a trade deficit of ¥461.2 billion.
• Market participants have been anticipating slightly higher inflation after former President Donald Trump’s election victory, which was seen as a key trigger behind the recent sharp move up in the US Treasury bond yields. 
• Federal Reserve Bank of Kansas President Jeffrey Schmid noted on Tuesday that large fiscal deficits will not cause inflationary pressures because the central bank will prevent it, though that could mean higher interest rates.
• The US Dollar consolidates its recent pullback from the year-to-date high and languishes near the weekly low, albeit, the downside remains cushioned in the wake of expectations of a less aggressive easing by the Fed. 
• Scheduled speeches by a slew of influential FOMC members later this Wednesday will influence the USD price dynamics and provide some impetus to the USD/JPY pair in the absence of any relevant US macro data.

USD/JPY needs to find acceptance above 155.00 to support prospects for further appreciation

From a technical perspective, the USD/JPY pair's overnight strong rebound suggests that the recent corrective slide from a multi-month high has run its course. The subsequent move up, along with the positive oscillators on the daily chart, supports prospects for a further appreciating move for spot prices. Bulls, however, need to wait for a sustained strength above the 155.00 mark before placing fresh bets. 

Some follow-through buying beyond the weekly top, around the 155.35 area, will reaffirm the positive outlook and lift the USD/JPY pair to the 155.70 intermediate hurdle en route to the 156.00 round-figure mark. The momentum could extend further towards retesting the multi-month top, around the 156.75 region touched last Friday.

On the flip side, the 154.40-154.35 area now seems to protect the immediate downside ahead of the 154.00 mark. Any further decline might continue to find decent support near the 153.30-153.25 region, or the overnight swing low. This is followed by the 153.00 round figure and the next relevant support near the 152.70-152.65 area, below which the USD/JPY pair could drop to the very important 200-day Simple Moving Average (SMA), around the 151.90-151.85 region.

• USD/JPY falls to a six-day low, breaking through key support levels amidst heightened risk aversion.
• Technical indicators suggest potential further declines, with next targets set at Kijun-sen and 200-day SMA at 151.88.
• Immediate resistance for USD/JPY is located at the 154.00 level, with significant upper resistance at the recent peak of 156.75.

The Japanese Yen registered solid gains versus the US Dollar in early trading on Tuesday, exchanging hands at 153.83 at the time of writing. Risk aversion sponsored by the escalation of the Ukraine-Russia conflict keeps traders seeking the safety of haven currencies, like the Yen and the Swiss Franc.

USD/JPY Price Forecast: Technical outlook

The USD/JPY cleared support at the November 7 high at 154.71, opening the door for further losses. The pair achieved a lower low, falling to a six-day bottom of 153.28, which could pave the way to testing the 200-day Simple Moving Average (SMA) at 151.88.

On its way to the 200-day SMA, the USD/JPY must clear the Kijun-sen at 152.80, followed by the 152.00 mark. If cleared up, next would be the 200-day SMA, followed by the 100-day SMA at 151.94.

On the other hand, the USD/JPY first resistance would be the 154.00 figure. Once cleared, the next resistance would be the November 15 peak at 156.75.

USD/JPY Price Chart – Daily

The US Dollar (USD) could trade in a choppy manner, likely between 153.80 and 155.10. In the longer run, pullback in USD could extend to 153.20, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

USD can lower down to 153.20

24-HOUR VIEW: “After USD plunged last Friday, we indicated yesterday that ‘While the sharp and swift sell-off appears to be overdone, there is a chance for USD to drop below 153.85 before stabilisation can be expected.’ USD dipped briefly to 153.84, rebounded strongly to 155.35, and then pulled back, closing at 154.65 (+0.20%). The price action has resulted in a mixed outlook. Today, USD could trade in a choppy manner, likely between 153.80 and 155.10.”

1-3 WEEKS VIEW: “Our update from yesterday (18 Nov, spot at 154.20) remains valid. As highlighted, ‘The current price action is likely part of a pullback that could extend to 153.20.’ On the upside, should USD break above 155.80 (no change in ‘strong resistance’ level), it would mean that the current downward pressure has eased.”

USD/JPY saw choppy trades over the last 24 hours. USD/JPY was last at 153.61, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

USD/JPY may break below the support at 153.30

“Markets were earlier hoping BoJ Governor Ueda dropped some hints or forward guidance on policy move at Dec MPC. But clearly those hopes were misplaced. He said that actual timing of adjustments will continue depending on developments in economic activity and prices as well as financial conditions – This is akin to policy decision being data dependent, which can justify policy action in Dec MPC.”

“Governor Ueda also spoke about focus on shunto wage negotiations going forward. Bit and pieces of news flow relating to shunto may come intermittently but typically, we may have to wait till Mar or Apr next year for confirmation of the quantum of wage increase.”

“Bullish momentum on daily chart faded while RSI fell. Potential bearish divergence on RSI observed. Further downside play likely. Support at 153.30 (21 DMA, 61.8% fibo retracement of Jul high to Sep low) needs to be broken for bears to gather further traction towards 150.70 (50% fibo). Resistance at 156.50 (76.4% fibo).”

• USD/JPY rebounds from 155.00 as BoJ Ueda didn’t provide specific timing for further interest rate hikes.
• Japan Kato warned of possible intervention to support the Yen against excessive volatile moves.
• Trump’s protectionist policies would accelerate US inflation and growth.

The USD/JPY recovers sharply from 155.00 in Monday’s North American session after a sharp correction on Friday. The asset bounces back as investors doubt the capability of the Bank of Japan (BoJ) to hike interest rates again in the near term.

In a meeting with business leaders in Nagoya, BoJ Governor Kazua Ueda kept hopes of more rate hikes alive by saying that the central bank will tighten the monetary policy further if the economy performs in line with its expectations. Ueda mentioned that the central bank is evaluating every factor including the risk associated with the United States (US) economy.

However, Ueda stayed vague on providing a specific timing for rate cuts, which forced traders to doubt BoJ’s ability to increase interest rates further.

Meanwhile, expectations of Japan’s intervention in the FX domain could offer some support to the Japanese Yen (JPY). On Friday, Japanese Finance Minister Katsunobu Kato warned of possible intervention if the yen fell too far and too fast.

The US Dollar (USD) performs strongly across the board as market participants expect interest rate cuts from the Federal Reserve (Fed) would be slower and shallow. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, clings to gains near 107.00, the highest level seen in more than a year.

Fed dovish bets have been eased as investors expect the economic agenda of President-elected Donald Trump to result in higher inflation and stronger economic growth.

This week, investors will pay close attention to the preliminary S&P Global PMI data for November, which will be published on Friday.

Chance for US Dollar (USD) to drop below 153.85; the major support at 153.20 is unlikely to come under threat. In the longer run, pullback in USD could extend to 153.20, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.  

Pullback in USD could extend to 153.20

24-HOUR VIEW: “Last Friday, we were of the view that USD ‘is likely to continue to rise.’ Our view was incorrect, as after rising to a high of 156.74, USD plunged to a low of 153.85. USD closed sharply lower by 1.22% at 154.34. While the sharp and swift sell-off appears to be overdone, there is a chance for USD to drop below 153.85 before stabilisation can be expected. The major support at 153.20 is unlikely to come under threat. Resistance is at 154.80; a breach of 155.25 would suggest the weakness in USD has stabilised.”

1-3 WEEKS VIEW: “When USD was at 156.50 last Friday (15 Nov), we indicated that ‘Momentum remains strong, and the next technical objective is at 158.00.’ USD then rose to 156.74 and then in a sudden move, plunged to a low of 153.85. The breach of our ‘strong support’ level at 154.95 indicates that the USD advance from the middle of last week has ended. The current price action is likely part of a pullback that could extend to 153.20. The downward pressure would remain intact as long as 155.80 is not breached.”

USD/JPY rose sharply this morning, and was last seen at 154.84, OCBC FX analysts Frances Cheung and Christopher Wong notes.

Bullish momentum on daily chart fades

“Markets were earlier anticipating some hint on policy moves from Governor Ueda at an event in Nagoya but his remarks were interpreted as less hawkish. He said that actual timing of adjustments will continue depending on developments in economic activity and prices as well as financial conditions – akin to policy decision being data dependent.”

“Last Fri, Finance Minister Kato said authorities will respond appropriately to any excessive move and authorities see one sided, sudden move in FX markets. In the very near term, self-inflicted concerns of officials’ intervention may slow pace of USD/JPY rise.”

“Bullish momentum on daily chart faded while RSI was flat. Potential bearish divergence on RSI observed. Further downside play not ruled out. Support at 153.00/30 (21 DMA, 61.8% fibo retracement of Jul high to Sep low) needs to be broken for bears to gather further traction towards 150.70 (50% fibo). Resistance at 156.50 (76.4% fibo).”

The US Dollar (USD) is likely to continue to rise; the levels to monitor are 157.00 and 157.50. Momentum remains strong; the next technical objective is at 158.00, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

The next technical objective for USD/JPY is at 158.00

24-HOUR VIEW: “Following the sharp rise in USD two days ago, we noted in early Asian trade yesterday that ‘momentum remains robust.’ We were of the view that ‘while USD could break above 156.00, it might not be able to maintain a foothold above this level.’ We underestimated the strength of the advance, as USD soared to 156.42, closing at 156.25 (+0.51%). The impulsive momentum is likely to continue to outweigh the overbought conditions. In other words, USD is likely to continue to rise. The levels to monitor are 157.00 and 157.50. To sustain the overbought momentum, USD must remain above 155.55 (minor support is at 156.05).”

1-3 WEEKS VIEW: “We turned positive in USD two ago (13 Nov), when it was at 154.70, indicating that ‘the increase in momentum suggests further USD strength towards 156.00.’ Yesterday, USD rose and surpassed 156.00. Momentum remains strong, and the next technical objective is at 158.00. To keep the momentum going, USD must remain above 154.95 (‘strong support’ level was at 154.00 yesterday).”

• USD/JPY trades in positive territory for the fifth straight day near 156.60 in Friday’s early Asian session. 
• Japan’s GDP rose 0.2% QoQ in Q3, as expected.
• Fed’s Powell said strong US economic growth will allow the Fed to take its time on rate cuts. 

The USD/JPY pair extends the rally to around 156.60, the highest level since July 23 during the early Asian session on Friday. The upward movement of the pair is bolstered by the firmer US Dollar (USD) broadly. Traders brace for the US October Retail Sales, which is due later on Friday. 

The preliminary Japan’s Gross Domestic Product (GDP) expanded by 0.2% QoQ in the third quarter (Q3) versus 0.5% prior, in line with the market consensus. The country’s GDP Annualized grew 0.9% in Q3, above the market consensus of 0.7%, and slowed sharply from the 2.2% growth seen in Q2. The Japanese Yen remains weak in an immediate reaction to the GDP report. 

The Bank of Japan (BoJ) Governor Kazuo Ueda warned during the October monetary policy decision that the central bank would scrutinize income data for future policy decisions. The uncertainty surrounding the BoJ rate-hike plans is likely to weigh on the JPY against the Greenback in the near term.  However, the verbal intervention from Japanese authorities might help limit the JPY's losses. 

On the USD’s front, Federal Reserve (Fed) Chair Jerome Powell noted on Thursday that strong US economic growth will allow policymakers to take their time in deciding about the size and the pace to cut interest rates. “The economy is not sending any signals that we need to be in a hurry to lower rates,” said Powell. The cautious stance of Powell prompted traders to lower their expectations for a December rate cut, lifting the Greenback. 

Meanwhile, Richmond Fed President Thomas Barkin stated on Thursday that while the Fed has made strong progress so far, there’s still more work to be done to keep the momentum going. The markets have priced in nearly 59.1% of the 25 basis points (bps) rate cut by the Fed at the December meeting, down from 75% last week, according to the CME FedWatch Tool. 

• USD/JPY may have formed a broadening formation pattern with bearish potential. 
• The pair has overshot the upper boundary a little but it may be about to start a decline. 

USD/JPY could be overshooting the upper boundary line of a Broadening Formation (BF) price pattern that looks like it has been forming over the last three weeks.

BFs develop when price starts to go sideways but forms higher highs and lower lows with each leg of the unfolding range. 

USD/JPY 4-hour Chart 

BFs occur during periods of high market volatility as has been the case during the formation of the one on USD/JPY which coincides with the US presidential election. 

At a price top the pattern is a sign of a bearish reversal, with an eventual decline below the lower boundary line. 

Assuming USD/JPY has formed the pattern, it has just overshot the upper boundary line. This could either mean the pattern is invalid or not. It is possible the overshoot is a sign of exhaustion and that the price will soon start to decline back down to the lower boundary line at around 151.30. A break below 1.5460 (November 6 high) would probably confirm such a decline.

If the (blue) Moving Average Convergence Divergence (MACD) momentum indicator crosses below its red signal line that will add further weight of evidence to the bearish thesis. 

Eventually price is likely to break below the lower boundary line and start an even deeper decline. If so, it is likely to fall to a point equal to the width of the pattern at its broadest point extrapolated lower.

Alternatively, the pattern may be false and USD/JPY could still be in a strong short and medium-term uptrend. If so, given the principle that “the trend is your friend” it will probably continue higher once the current pullback ends. 

In such a case, a break above 156.25 would likely confirm further upside towards a target at around 157.86 (July 19 high). 

Momentum remains robust; the US Dollar (USD) could break above 156.00 but might not be able to maintain a foothold above this level. In the longer run, increase in momentum suggests further USD strength towards 156.00, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Increase in momentum suggests further USD strength

24-HOUR VIEW: “USD surged two days ago. Yesterday, we noted that ‘upward momentum is robust,’ and we expected USD to ‘continue to rise, potentially reaching 155.45.’ We highlighted, that ‘On the downside, any pullback is likely to stay above 154.00, with minor support at 154.35.’ Our view strong USD view was validated, as after dropping briefly to 154.33 during NY session, USD soared to 155.62. Momentum remains robust, and this will likely outweigh the overbought conditions. That said, while USD could break above 156.00 today, it might not be able to maintain a foothold above this level. On the downside, support levels are at 155.10 and 154.70.”

1-3 WEEKS VIEW: “We turned positive in USD yesterday (13 Nov), when it was at 154.70. We pointed out ‘the increase in momentum suggests further USD strength towards 156.00.’ We added, ‘To keep the momentum going, USD must remain above the ‘strong support’ level, currently at 153.35.’ USD then rose to 155.62. There is no change in our view. Should USD break above 156.00, the next technical objective will be at 157.00. The ‘strong support’ level has moved higher to 154.00 from 153.35.”

• USD/JPY pulls back after the Japanese Yen strengthens following release of Japanese Producer Price Index for October. 
• Higher prices could filter through into broader inflation and lead the BoJ to hike interest rates, strengthening JPY. 
• The US Dollar remains underpinned by still-high US inflation data and expectations of US fiscal and trade policy. 

USD/JPY retreats after reaching a new three-month high on Wednesday after the release of Japanese factory-gate price inflation data (producer prices) supported the Japanese Yen (JPY) after they showed a higher-than-expected rise in October. The increase in producer prices  could filter through into consumer prices, pushing up the main consumer inflation indexes. This, in turn, is likely to make the Bank of Japan (BoJ) raise interest rates, and higher interest rates strengthen a currency as they lead to increased net capital inflows. 

The US Dollar (USD) remains supported after the release of US Consumer Price Index (CPI) data showed headline inflation ticking higher in October, although all the readings were in line with economists forecasts. The stubbornly high inflation data is likely to keep the USD supported as it could encourage the US Federal Reserve (Fed) to reconsider cutting interest rates, resulting in a lift for the US Dollar. This in turn is likely to limit losses for the USD/JPY. 

Despite the pullback, USD/JPY continues to trade in a short and medium-term uptrend due to a strengthening US Dollar. This comes amid market expectations that President-elect Donald Trump’s mix of protectionism, higher tariffs and lower taxes will be inflationary for the US. This, in turn, is likely to flatten the trajectory for interest rates which had been expected to fall steeply. Although the market still sees odds of over 80% in favor of the Fed making a cut of 25 basis points (bps) (0.25%) to its main interest rate in December, according to the CME FedWatch tool, the outlook for 2025 may increasingly be more dependent on the inflationary impact (or not) of the new policies espoused by the Trump administration. 

The Japanese Producer Price Index (PPI) rose by 3.4% YoY in October from an upwardly revised 3.1% in the previous month and above the 3.0% expected. On month, PPI rose by 0.2% from an upwardly-revised 0.3% previously and above expectations of 0.0%. 

US headline CPI, meanwhile, rose by 2.6% YoY in October from 2.4% in the previous month and was in line with expectations. MoM headline CPI increased by 0.2% from 0.2% previously and the same expected. 

US Core CPI, meanwhile, rose by 3.3% in October, from the same in the previous month and 3.3% forecast. On month it rose by 0.3%, from the same both previously and expected. 

The BoJ’s October policy meeting Minutes, released on Sunday, revealed a divide among policymakers over the timing of future interest rate hikes. However, the Governor of the BoJ Katsuo Ueda has always said that if economic data meets the BoJ’s forecasts it will go ahead and hike rates. So far, the data has mostly met or exceeded estimates. In the meeting Minutes, the central bank maintained its forecast that it could raise its benchmark policy rate to 1.0% (from 0.25%) by the second half of fiscal 2025.

The US Dollar (USD) is likely to continue to rise, potentially reaching 155.45. The major resistance at 156.00 is unlikely to come into view. In the longer run, increase in momentum suggests further USD strength towards 156.00, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Further USD strength towards 156.00 is likely

24-HOUR VIEW: “The strong surge that sent USD soaring to 154.92 was surprising (we were expecting range trading). Not surprisingly, upward momentum is robust. Today, USD is likely to continue to rise, potentially reaching 155.45. The major resistance at 156.00 is unlikely to come into view for now. On the downside, any pullback is likely to stay above 154.00, with minor support at 154.35.”

1-3 WEEKS VIEW: “We indicated two days ago (11 Nov, spot at 152.80), that the recent “upward momentum has eased.” We expected USD to trade in a 151.30/154.70 range. We did not expect the momentum to rebuild so quickly, as USD soared and broke above 154.70 (high has been 154.92). The increase in momentum suggests further USD strength towards 156.00. To keep the momentum going, USD must remain above the ‘strong support’ level, currently at 153.35.”

• USD/JPY is probably forming a bearish Broadening Formation price pattern. 
• These often occur during periods of market volatility and end with a breakout lower.

USD/JPY is probably forming a Broadening Formation price pattern which began in the last week of September. 

The Broadening Formation occurs when price starts to go sideways but forms higher highs and lower lows with each leg of its unfolding. When the highs and lows of the range are connected with trendlines this creates a widening range, or price pattern. 

USD/JPY 4-hour Chart 

Broadening Formations usually occur during periods of high market volatility as has been the case during the formation of the one on USD/JPY which coincides with the US presidential election. 

When it forms at a price top the pattern is bearish as is the case with the one on USD/JPY. Eventually price is likely to break below the lower boundary line and decline rapidly lower. The distance it is likely to go depends on how wide the pattern becomes at its broadest point.

It is difficult to determine when these patterns have concluded, however, it is worth keeping USD/JPY on a watchlist and assessing its maturity as it evolves. 

The Moving Average Convergence Divergence (MACD) momentum indicator is a useful indicator for trading the up and down legs of the pattern. The blue MACD tends to be a useful indicator of turning points in price as it turns above or below its red signal line.

Instead of continuing to advance, USD is more likely to trade in a 153.00/154.10 range. In the longer run, upward momentum has eased; USD is expected to trade in a 151.30/154.70 range, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Upward momentum has eased

24-HOUR VIEW: “When USD was trading at 152.80 yesterday, we noted that ‘provided that USD remains above 152.25 (minor support is at 152.50), it could edge higher to 153.25, potentially reaching 153.55.’ Our view was of a higher USD was not wrong, even though the anticipated advance exceeded our expectation as USD rose to a high of 153.95. USD then pulled back from the high to close at 153.71. The pullback in overbought conditions and slowing momentum suggests instead of continuing to advance, USD is more likely to trade in a 153.00/154.10 range.”

1-3 WEEKS VIEW: “We shifted from a positive to neutral USD stance yesterday (11 Nov, spot at 152.80), indicating that ‘upward momentum has eased.’ We expected USD to trade in a 151.30/154.70 range. We continue to hold the same view.”

Ishiba will remain as PM after receiving support from parliament after 2 rounds of voting in a special parliamentary session yesterday. USD/JPY drifted higher; last at 153.83 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is mild bearish

“Ishiba will lead the minority government with LDP-Komeito coalition, alongside the support from Democratic Party for the People (DPP) on a confidence and supply agreement (while staying out of the coalition).”

“DPP wants to raise the income ceiling for tax payments and had previously critic the BoJ for raising rates. Markets may also ‘speculate’ that BoJ may not hike this year, further adding to JPY weakness. USDJPY inched higher this morning.”

“Daily momentum is mild bearish, but RSI rose. Near term risks skewed to the upside. Resistance at 154.80 (recent high) and 156.50 (76.4% fibo). Support at 153.30 (61.8% fibo retracement of Jul high to Sep low), 151.70 levels (21, 200 DMAs), 150.70 (50% fibo).”

• The Japanese Yen continues with its underperformance amid the BoJ rate-hike uncertainty. 
• Trump-related tariff fears and elevated US bond yields also undermine the lower-yielding JPY.
• Traders look to speeches by Fed officials and key economic data releases for a fresh impetus.

The Japanese Yen (JPY) remains on the back foot against its American counterpart during the Asian session on Tuesday and seems vulnerable to weaken further. A fragile minority government in Japan is expected to make it difficult for the Bank of Japan (BoJ) to tighten its monetary policy. Moreover, the BoJ Summary of Opinions from the October meeting revealed that policymakers were split on whether to raise interest rates again. This, along with concerns about the return of President-elect Donald Trump's tariffs, underpins the JPY. 

Meanwhile, Trump's expansionary policies and corporate tax cuts should put upward pressure on inflation, which could limit the Federal Reserve's (Fed) scope to ease policy. This, in turn, remains supportive of elevated US Treasury bond yields and validates the near-term negative outlook for the lower-yielding JPY. The US Dollar (USD), on the other hand, preserves the positive trend that followed Trump's victory in the US presidential election and suggests that the path of least resistance for the USD/JPY pair remains to the upside. 

Japanese Yen is pressured by the uncertainty surrounding the BoJ’s rate-hike path

• Japan's political landscape raised doubts about the Bank of Japan's ability to hike interest rates again and the speculations were further fueled by the Summary of Opinions from the October meeting released on Monday.
• According to Kyodo News, Japanese Prime Minister Shigeru Ishiba is arranging his first summit with Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation forum summit in mid-November.
• Japanese PM Ishiba said on Monday that the government planned to meet with business and labor union representatives later this month to discuss next year’s annual wage negotiations.
• The tariffs promised by US President-elect Donald Trump could strain Japanese firms, which export heavily to the US, and potentially impact economic growth, creating another hurdle for the BoJ's rate-hike plans.
• Minneapolis Fed President Neel Kashkari said on Sunday that the central bank wants to have confidence and needs to see more evidence that inflation will go back to the 2% target before deciding on further interest rate cuts. 
• Investors now seem convinced that Trump's expected policy measures would spur economic growth and boost inflation, restricting the Federal Reserve from easing its monetary policy more aggressively.
• The US Treasury bond yields hold steady below the post-US election swing high and the US Dollar remains close to its highest level since early July touched on Monday, offering some support to the USD/JPY pair. 
• A slew of influential FOMC members are scheduled to speak this week, including Fed Chair Jerome Powell, which, along with the US consumer inflation figures, should offer cues about the US central bank's rate-cut path. 
• This week's economic docket also features the release of the Prelim Q3 GDP print from Japan and the US monthly Retail Sales figures on Friday, which might contribute to providing a fresh impetus to the USD/JPY pair. 

Technical Outlook: USD/JPY seems poised to challenge multi-month top, around the 154.70 area

From a technical perspective, the recent breakout above the 200-day Simple Moving Average (SMA) and the overnight close above the 61.8% Fibonacci retracement level of the July-September downfall favors bullish traders. Moreover, oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone, validating the near-term positive outlook for the USD/JPY pair. Hence, a subsequent move up back towards challenging a multi-month top, around the 154.70 area, looks like a distinct possibility. This is closely followed by the 155.00 psychological mark, above which spot prices could accelerate the momentum towards the 155.65-155.70 intermediate resistance en route to the 156.00 round figure. 

On the flip side, the 61.8% Fibo. resistance breakpoint, around the 153.35 region, now seems to protect the immediate downside ahead of the 153.00 mark and the 152.70-152.65 horizontal support. Any further corrective decline might still be seen as a buying opportunity near the 152.00 mark and remain limited near the 200-day SMA. The latter is currently pegged around the 151.75 region and is followed by last week's swing low, around the 151.25 area. A convincing break below the latter might prompt some technical selling and drag the USD/JPY pair further below the 151.00 round figure, towards the 150.35-150.30 intermediate support en route to the 150.00 psychological mark.

Japanese parliament will vote in a special session this afternoon to decide on who will take premiership. Prime ministerial vote can take up to two rounds, where in the first round, lawmakers of different political party typically vote for their respective leaders making it unlikely for any candidate to secure a clear majority. Pair was last at 153.73 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is mild bearish

“In this case, top two candidates will go into a run-off (in the second round) that only requires a simple majority to win. There is some uncertainty if PM Ishiba will win enough votes to lead a new government as the new PM. LDP and Komeito need support from some in the opposition to pass major legislation, including an extra budget to fund an economic stimulus package.”

“Assuming no major upset. i.e. Ishiba may still win and a minority government may suffice with opposition DPP and JIP as partners on confidence and supply agreement. Point to note is that these opposition partners had earlier critique BoJ for raising rates.”

“USD/JPY inched higher this morning. Daily momentum is mild bearish while RSI rose. Consolidation likely. Resistance here at 154.80 (recent high) and 156.50 (76.4% fibo). Support at 151.70 levels (21, 200 DMAs), 150.70 (50% fibo).”

Sharp pullback appears to be overextended; instead of continuing to weaken, the US Dollar (USD) is likely to trade in a range of 152.50/153.85. In the longer run, upward momentum has slowed sharply and quickly; a break of 152.50 would mean that USD is likely to trade in a range instead of heading higher, UOB Group FX analysts Quek Ser Leang and Peter Chia note.

Sharp pullback appears to be overextended

24-HOUR VIEW: “When USD was at 154.55 yesterday, we indicated that ‘the overbought USD rally could extend above 155.00 before pausing.’ However, USD did not rise above 155.00. Instead, it pulled back sharply to 152.69. The pullback appears to be overextended, and USD is unlikely to weaken much further. Today, USD is more likely to trade in a range between 152.50 and 153.85.”

1-3 WEEKS VIEW: “We highlighted yesterday (07 Nov, spot at 154.55) that’ the spike in momentum suggests USD could continue to rise, possibly to 156.00.’ The subsequent steep pullback was surprising, and upward momentum has slowed sharply and quickly. From here, if USD breaks below 152.50 (no change in ‘strong support’ level), it would mean that USD is likely to trade in a range instead of heading higher.”