Japanese Yen sticks to intraday losses as rising US bond yields boosts USD

• The Japanese Yen weakens against the USD and is weighed down by a combination of factors.
• Rebounding US bond yields and a positive risk tone drive flows away from the safe-haven JPY.
• A strong pickup in the USD demand contributes to USD/JPY’s move back above mid-150.00s.

The Japanese Yen (JPY) drifts lower against its American counterpart at the start of a new week/month, allowing the USD/JPY pair to reverse a part of Friday’s losses to the lowest level since October 21. The growing market conviction that US President-elect Donald Trump’s tariff plans could reignite inflationary pressures and limit the scope for the Federal Reserve (Fed) to cut rates trigger a fresh leg up in the US Treasury bond yields. This, in turn, helps revive the US Dollar (USD) demand and turns out to be a key factor driving flows away from the lower-yielding JPY. 

That said, expectations that the Bank of Japan (BoJ) will hike interest rates again this year might hold back the JPY bears from placing aggressive bets. Adding to this, bets that the US central bank will lower borrowing costs by 25 basis points in December might contribute to keeping a lid on any further gains for the USD/JPY pair. Traders might also opt to move to the sidelines and look to this week’s important US macro releases, including the closely watched Nonfarm Payrolls (NFP) report on Friday, before positioning for the next leg of a directional move. 

Japanese Yen remains depressed against USD; bulls shrug off December BoJ rate hike bets

• US President-elect Donald Trump threatened a 100% tariff on the so-called ‘BRICS’ nations – Brazil, Russia, India, China, and South Africa – if they replace the US Dollar with another currency for international transactions. 
• This comes on top of Trump’s pledge to impose big tariffs against America’s three biggest trading partners – Mexico, Canada and China – and adds to market concerns about the second wave of a global trade war. 
• Investors now seem convinced that Trump’s tariff plans and expansionary policy could push consumer prices higher, setting the stage for the Federal Reserve to stop cutting interest rates or possibly raise them again. 
• The prospects for a less dovish Fed trigger a fresh leg up in the US bond yields, which assists the USD to recover from a near three-week low and is seen driving flows away from the lower-yielding Japanese Yen. 
• Friday’s stronger consumer inflation figures from Tokyo, Japan’s capital, signaled that the underlying inflation is gaining momentum and backed the case for another rate hike by the Bank of Japan in December. 
• BoJ Governor Kazuo Ueda said on Saturday that the next interest rate hikes are nearing in the sense that economic data are on track, though he would like to see what kind of momentum the fiscal 2025 Shunto creates.
• Japan’s Ministry of Finance reported this Monday that Capital Spending rose 8.1% year-on-year in the third quarter, signaling that strong domestic demand was underpinning the fragile economic recovery.
• Russian and Syrian jets have carried out a series of air strikes on Syrian rebels led by the jihadi group Hayat Tahrir al-Sham, who took over most of Aleppo in a shock offensive on Saturday and also entered the city of Hama.
• Ukrainian President Volodymyr Zelenskyy has stated that he is willing to give up occupied Ukrainian territory to Russia, albeit with some conditions, in order to reach a ceasefire agreement and achieve peace. 
• China’s official Manufacturing Purchasing Managers’ Index (PMI) edged up to 50.3 in November from 50.2, while the NBS Non-Manufacturing PMI eased to 50.0 during the reported month from October’s 50.2.
• China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) jumped to 51.5 in November after recording 50.3 in October amid hopes that the government will introduce more stimulus to bolster domestic demand.
• Investors now look to this week’s important US macro releases, including the closely watched US monthly employment details (NFP) report, for cues about the Fed’s future rate-cut path and some meaningful impetus.

USD/JPY needs to find acceptance to support prospects for additional gains to 200-day SMA

From a technical perspective, any further move up is likely to confront stiff resistance near the 151.00 round-figure mark amid negative oscillators on the daily chart. A sustained strength beyond, however, could trigger a short-covering rally and lift the USD/JPY pair to the 151.65 intermediate hurdle en route to the 152.00 mark. The latter represents the very important 200-day Simple Moving Average (SMA) and should act as a key pivotal point. Some follow-through buying will suggest that the recent corrective pullback from a multi-month top has run its course and shift the near-term bias back in favor of bullish traders. 

On the flip side, the 150.00 psychological mark now seems to protect the immediate downside ahead of Friday’s swing low, around the 149.45 region. Some follow-through selling has the potential to drag the USD/JPY pair further towards the 149.00 round figure en route to the next relevant support 147.60-147.55 support and the 148.00 mark (50% retracement level of the September-November rally).