Japanese Yen flirts with weekly low against the US Dollar on softer Japan core CPI

• The Japanese Yen ticks lower on Friday in reaction to softer domestic data.
• The National core CPI fell below 3% in October for the first time in 13 months.
• The Japan Manufacturing PMI remains below 50 for the sixth straight month.

The Japanese Yen (JPY) weakens a bit during the Asian session on Friday following the release of softer domestic core consumer inflation figures, though rising bets for a Bank of Japan (BoJ) pivot help limit deeper losses. The headline and core rates of inflation in Japan have been above the BoJ's 2% target for more than a year now. Adding to this, another substantial round of pay hikes next year by Japanese firms could fuel consumer spending and demand-driven inflation. This has been fueling speculations that the BoJ will certainly end its negative rate policy in the first few months of 2024.

The USD/JPY pair, meanwhile, remains below the weekly top despite the disappointing release of the au Jibun Bank flash Japan Manufacturing PMI, which remained in contraction territory for the sixth successive month in November. The upside, however, remains capped in the wake of a mildly softer tone surrounding the US Dollar (USD). Growing acceptance that the Federal Reserve (Fed) is done raising interest rates and could start cutting rates during the first half of 2024 keeps the USD bulls on the defensive just above its lowest level since August 31 touched earlier this week.

Daily Digest Market Movers: Japanese Yen ticks lower in reaction to softer domestic data, hawkish BoJ bets limit losses

• Government data showed on Friday that the nationwide core Consumer Price Index (CPI), which excludes volatile fresh food costs, rose 2.9% year-on-year in October, slightly below the 3.0% expected.
• The reading, however, was well above the Bank of Japan's 2% annual target for the 19th consecutive month, indicating that inflationary pressures remained more stubborn than expected in the country.
• The narrower gauge of inflation, the so-called core-core index, which strips away fresh food and fuel costs, slowed from 4.2% in September to 4.0% during the reported month, though it remains close to a 40-year peak.
• The headline CPI accelerated from the 3% seen in the prior month, to the 3.3% YoY pace in October.
• This, along with expectations that another substantial round of pay hikes next year will support sustained and stable inflation, reaffirms market bets for an imminent shift in the BoJ's policy stance.
• Growing acceptance that the Federal Reserve will not raise interest rates further continues to undermine the US Dollar and keeps a lid on any meaningful appreciating move for the USD/JPY pair.
• The flash Japan Manufacturing PMI slipped to 48.1 in November from the 48.7 previous. The index has remained below the 50.0 threshold that separates contraction from expansion since June.
• Investors now look forward to the flash US PMI prints, due for release later during the early North American session, for short-term trading opportunities on the last day of the week.

Technical Analysis: USD/JPY remains below the 150.00 psychological mark or the 200-period SMA on H4

From a technical perspective, move beyond the 149.75 area, or the weekly peak, is likely to confront some resistance near the 200-period Simple Moving Average (SMA) on the 4-hour chart. The said barrier is pegged near the 150.00 psychological mark, which is followed by the 100-period SMA on the 4-hour chart, currently near the 150.20 zone. A sustained strength beyond the latter will negate any near-term negative bias and lift the USD/JPY pair to the 151.00 mark. Bulls might eventually aim back towards challenging the YTD peak, just ahead of the 152.00 mark.

On the flip side, any meaningful slide might now find some support near the 149.00 mark. A convincing break below could drag the USD/JPY pair to the 148.35-148.30 region en route to the 148.00 round figure. Some follow-through selling will expose the monthly swing low, around the 147.15 region touched on Tuesday.