Japanese Yen strengthens amid the emergence of fresh selling around the US Dollar

• Japanese Yen recovers some of its losses against the USD registered over the past two days.
• Speculations of a hawkish shift in the BoJ’s policy stance benefit the JPY and exert pressure.
• Bets that the Fed is done raising rates cap the recent USD recovery and contribute to the slide.

The Japanese Yen (JPY) gave back some of its recent strong gains against the US Dollar (USD) and continued with its weakening trend for the second successive day on Wednesday. Against the backdrop of Tuesday's hawkish FOMC minutes, the better-than-expected US labor market data and a rise in consumer inflation expectations assisted the USD to move away from its lowest level since August 31. This, in turn, allowed the USD/JPY pair to build on its solid recovery from the 147.15 area, or over a two-month low touched on Tuesday.

Spot prices, however, struggle to capitalize on the move and meet with a fresh supply during the Asian session on Thursday. Bets that the Federal Reserve (Fed) will not hike interest rates any further and instead will start cutting rates during the first half of 2024 could keep a lid on any further gains for the USD. This, along with expectations of a possible hawkish shift in the Bank of Japan's (BoJ) policy stance, forces the USD/JPY pair to snap a two-day winning streak and reverse a part of the overnight strong gains.

Daily Digest Market Movers: Japanese Yen stalls a two-day-old weakening trend against the US Dollar ahead of the US Thanksgiving holiday

• The Japanese Yen weakened to 149.75 against the US Dollar on Wednesday, albeit recovered some of its losses registered over the past two days on Thursday.
• Speculations that the Bank of Japan (BoJ) will almost certainly end its negative rate policy in the first few months of 2024 dragged the USD/JPY lower on Thursday.
• Minutes from the Federal Reserve's last meeting indicated the central bank was likely to maintain a restrictive stance on interest rates for some time.
• The US Initial Jobless Claims dropped by 24,000 to a seasonally adjusted 209,000 for the week ended November 18, the lowest level in more than a month.
• The upbeat data suggested that the US labor market remains resilient despite economic uncertainties and is not cooling as quickly as the Fed might have been expecting.
• The University of Michigan's survey showed that the Consumer Sentiment Index marked a fourth straight month of declines and came in at 61.3 for November.
• Inflation expectations, however, jumped to 4.5% in November, up from the 4.2% previous, rising for the second straight month and reaching to its highest reading since April 2023.
• Durable Goods Orders experienced a significant decline in October and dropped more than anticipated, by 5.4%, reversing the previous month's gain of 4.6%.
• Market participants have essentially priced out any further interest rate hikes by the Fed and now see a better than 50% chance of a rate cut by May 2024.
• Traders also opt to lighten their positions during the Asian session as trading activity is likely to remain limited on the back of the US Thanksgiving holiday.

Technical Analysis: USD/JPY needs to defend the 149.00 mark to support prospects for any further appreciating move

From a technical perspective, the USD/JPY pair has now dropped below the 23.6% Fibonacci retracement level of the latest leg up from the 147.15 area. A subsequent slide below the 149.00 mark will set the stage for a slide towards the 38.2% Fibo. level, around the 148.75 region. This is followed by support near mid-148.00s, or the 50% Fibo. level, and 61.8% Fibo. level, around the 148.15 region. A convincing break below the latter will suggest that the corrective bounce has run its course and expose the monthly swing low, around the 147.15 region touched on Tuesday, with some intermediate support near the 148.00 round figure.

On the flip side, the overnight swing high, around the 149.75 region, now seems to act as an immediate hurdle ahead of the 150.00 confluence, comprising the 200-period Simple Moving Average (SMA) on the 4-hour chart and the 61.8% Fibo. level. This is followed by the 100-period SMA on the 4-hour chart, currently near the 150.35 zone, which if cleared decisively will negate any near-term negative bias. The USD/JPY pair might then aim to reclaim the 151.00 mark before climbing further towards challenging the YTD peak, just ahead of the 152.00 mark.