Japanese Yen recovers a major part of its weekly losses against US Dollar

• The Japanese Yen benefits from a softer risk tone amid worries about a global economic downturn.
• Bulls seem unaffected and largely shrug off BoJ Governor Kazuo Ueda’s dovish remarks on Thursday.
• A subdued US Dollar price action contributes to the USD/JPY pair’s failure near the 100-day SMA.

The Japanese Yen (JPY) attracts some haven flows during the Asian session on Thursday and reverses a major part of its weekly losses against the US Dollar (USD) registered over the past three days. The US ADP report on Wednesday pointed to a notable reduction in private-sector employment. This comes a day after the US Labor Department reported that job openings tumbled in October to the lowest level since March 2021 and was seen as another sign that the tight labor market could be loosening. The data, meanwhile, fuels concerns about an economic slowdown and tempers investors' appetite for riskier assets, boosting demand for traditional safe-haven assets.

The USD/JPY pair, meanwhile, continues with its struggle to move back above the 100-day Simple Moving Average (SMA) support breakpoint and is further weighed down by subdued USD price action. The incoming US labor market data reaffirms market bets that the Federal Reserve (Fed) will cut interest rates early next year, which keeps the yield on the benchmark 10-year US government bond close to a three-month low. This, in turn, acts as a headwind for the buck and contributes to the offered tone surrounding the major.

That said, Bank of Japan (BoJ) board members recently downplayed speculations about an imminent shift in the policy stance. This might hold back the JPY bulls from placing aggressive bets and lend some support to the USD/JPY pair ahead of the crucial US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday. In the meantime, traders on Wednesday will take cues from the release of the usual Weekly Initial Jobless Claims data, which, along with the broader risk sentiment, should provide some impetus.

Daily Digest Market Movers: Japanese Yen attracts some haven flows and draws additional support from subdued USD price action

Signs that a tight US job market is loosening raise concerns about an economic slowdown and weigh on investors' sentiment, benefitting the safe-haven Japanese Yen.
The US Labor Department reported Tuesday that job openings declined by 617K to 8.73 million in October, or their lowest level in two-and-a-half-years.
The ADP report showed that US private-sector employers added just 103K jobs in November, down from the previous month's downwardly revised 106K.
The readings reaffirmed market expectations about an imminent shift in the Federal Reserve's policy stance and bets for a 25 basis points rate cut at the March policy meeting.
The slew of key US jobs data will continue on Thursday and Friday with the release of Weekly Initial Jobless Claims and the key Nonfarm Payrolls, respectively.
Israeli forces stormed southern Gaza's main city on Tuesday in the most intense day of combat of ground operations against Hamas militants, worsening the humanitarian crisis.
Bank of Japan Governor Kazuo Ueda said this Thursday that accommodative monetary policy and stimulus measures are supporting the Japanese economy.
Ueda added that they have not yet reached a situation in which they can achieve the price target sustainably and stably and with sufficient certainty.
Moreover, BoJ board members recently said that it is premature to debate an exit from the ultra-easy policy, which, in turn, might cap any further gains for the JPY.

Technical Analysis: USD/JPY once again faces rejection near 100-day SMA pivotal support breakpoint, now turned resistance

From a technical perspective, this week's repeated failures to move back above the 100-day SMA support breakpoint, now turned resistance, currently around the 147.45 area, and the subsequent decline favours bearish traders. Moreover, oscillators on the daily chart are holding deep in the negative territory and are still far from being in the oversold zone. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the downside and supports prospects for further losses.

Meanwhile, any subsequent decline is likely to find some support near the 146.65 region, below which spot prices could slide back to a multi-month low, around the 146.20 area touched on Monday. The latter coincides with the 38.2% Fibonacci retracement level of the July-October rally and should act as a key pivotal point. Some follow-through selling below the 146.00 mark could then drag the USD/JPY pair to the 145.45-145.40 intermediate support en route to the 145.00 psychological mark.

On the flip side, the 100-day SMA might continue to act as an immediate strong barrier, which if cleared decisively might trigger a short-covering rally and allow spot prices to reclaim the 148.00 mark. Any further move up, however, is likely to confront stiff barrier and remain capped near the 148.30-148.40 region. A sustained strength beyond the latter will suggest that the recent pullback from the 152.00 neighbourhood has run its course and shift the bias in favour of bullish traders.