JPY Price Forecast: BoJ Hopeful for Softer USD

USD/JPY ANALYSIS

• Grim outlook from Japanese assessment keep JPY upside limited this morning.
• Durable goods orders, consumer sentiment and jobless claims needed for overall US economic outlook.
• Can JPY bulls extend recent upside?

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JAPANESE YEN FUNDAMENTAL BACKDROP

The Japanese Yen has given back some of its recent gains against the greenback today after the FOMC minutes reiterated a more cautious yet restrictive monetary policy stance from the Federal Reserve. From a safe haven perspective, the recent agreement between Israel and Hamas to pause fighting has brought some limitations to JPY upside. The recent weakening of the USD has potentially been a blessing in disguise for the Bank of Japan (BOJ) as the need for intervention in FX markets may not be required should this trend continue. Early this morning, Japanese government officials stated that the economic outlook for Japan has been downgraded due to drained domestic demand – weighing negatively on the yen.

Later today (see economic calendar below), key US economic data is scheduled and could bolster a bearish outlook for the pair as forecasts on both durable goods orders and Michigan consumer sentiment look to be significantly lower. Jobless claims will also come into focus after last week’s reached 3-month highs.

ECONOMIC CALENDAR (GMT +02:00)

Source: DailyFX economic calendar

Tomorrow’s Thanksgiving holiday will likely see minimal movement across FX markets but Friday’s Japanese inflation will be crucial for short-term guidance on the pair; and may impact current pricing for rate hikes to begin in late 2024 (see table below):

BOJ INTEREST RATE PROBABILITIES

Source: Refinitiv

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TECHNICAL ANALYSIS

USD/JPY DAILY CHART

Chart prepared by Warren Venketas, IG

USD/JPY shows price action above shows the USD appreciating after yesterday’s long lower wick candle close as it finds resistance at the 50-day moving average (yellow). Should we get data in line with expectations from the US today, JPY bulls may well retest yesterday’s lows ahead of Friday’s inflation release.

Key resistance levels:

• 151.95
• 150.00
• 50-day MA

Key support levels:

• 148.16
• 147.37
• 145.91
• 145.00

IG CLIENT SENTIMENT: MIXED

IGCS shows retail traders are currently net SHORT on USD/JPY, with 76% of traders currently holding short positions (as of this writing).

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Contact and followWarrenon Twitter:@WVenketas