Japanese Yen remains on the front foot against USD, bulls seem non-committed

• The Japanese Yen ticks higher as stronger domestic inflation revives bets for more BoJ rate hikes.
• The upbeat market mood and elevated US bond yields cap the upside for the lower-yielding JPY.
• The USD stands firm near its highest level in over a year and offers support to the USD/JPY pair. 

The Japanese Yen (JPY) attracts some buyers for the second straight day on Friday amid reviving bets for more interest rate hikes by the Bank of Japan (BoJ), though it lacks any follow-through. Against the backdrop of BoJ Governor Kazuo Ueda’s hawkish remarks on Thursday, slightly higher-than-expected consumer inflation figures from Japan keep expectations for a December interest rate hike in play. Adding to this, Japan’s Prime Minister Shigeru Ishiba’s economic stimulus package worth ¥39 trillion underpins the JPY and exerts some pressure on the USD/JPY pair. 

Meanwhile, the growing conviction that US President Donald Trump’s policies could reignite inflation and force the Federal Reserve (Fed) to cut interest rates slowly remains supportive of elevated US Treasury bond yields. Furthermore, the prevalent risk-on mood – as depicted by a positive tone across the global equity markets – holds back traders from placing aggressive bullish bets around the safe-haven JPY. This, along with the post-US election US Dollar (USD) rally to a fresh year-to-date high, assists the USD/JPY pair to hold above the 154.00 round-figure mark.

Japanese Yen draws some support from reviving December BoJ rate-hike bets

• The Japan Statistics Bureau reported this Friday that the National Consumer Price Index (CPI) eased from 2.5% to the 2.3% YoY rate in October, while the core CPI, which excludes volatile fresh food items, grew 2.3%. 
• Additional details revealed that a core inflation reading that excludes both energy and fresh food costs remained above the Bank of Japan’s 2% annual target and rose to 2.3% in October from 2.1% in the prior month.
• The Bank of Japan Governor Kazuo Ueda said on Thursday that the central bank will seriously take into account the impact the recent foreign exchange-rate movements could have on the economic and price outlook.
• This keeps the door open for another BoJ interest rate-hike move in December, which, along with geopolitical risks from the worsening Russia-Ukraine war, boosts the Japanese Yen during the Asian session on Friday. 
• Meanwhile, US data released on Thursday showed that Weekly initial jobless claims dropped by 6,000 to 213,000, or a seven-month low last week as compared to consensus estimates for a reading of 220,000.
• US Existing Home Sales rebounded sharply after September’s slump to the lowest since October 2010 and rose to an annual rate of 3.96 million units in October, posting the first annual gain since mid-2021.
• A survey showed that manufacturing activity in the Philadelphia region unexpectedly contracted in November. The Federal Reserve (Fed) Bank of Philadelphia’s Manufacturing Index dropped to -5.5 from +10.3.
• Chicago Fed President Austan Goolsbee said that the inflation is on its way down to 2% and that it may make sense to slow the pace of interest rate cuts as the US central bank gets close to where rates will settle.
• Separately, New York Fed President John Williams noted that he sees inflation cooling and interest rates falling further as the labor market is now in balance and not providing any upward pressure on inflation.
• The US Dollar shot to its highest level since October 4, 2023, amid expectations that US President-elect Donald Trump’s policies could reignite inflation and limit the scope for the Fed to cut interest rates further.
• Furthermore, persistent concerns about inflation and potential fiscal expansion keep the US Treasury bond yields elevated, which, along with the upbeat market mood, caps the upside for the safe-haven JPY. 
• Traders now look forward to the release of the flash US Manufacturing and Services PMI prints, and the revised Michigan Consumer Sentiment Index for short-term opportunities heading into the weekend. 

USD/JPY bears need to wait for acceptance below 100-period SMA on H4

From a technical perspective, the USD/JPY pair has been showing some resilience below the 154.00 mark, which now coincides with the 100-period Simple Moving Average (SMA) on the 4-hour chart. Adding to this, oscillators on the daily chart are holding in positive territory, suggesting that any subsequent slide towards the 153.30-153.25 area, or the weekly low, could be seen as a buying opportunity.

Some follow-through selling below the 153.00 mark, however, could drag the USD/JPY pair to the next relevant support near mid-152.00s en route to the 152.00 round figure. The said handle coincides with the 200-day Simple Moving Average (SMA) and should act as a key pivotal point for short-term traders. 

On the flip side, immediate support is pegged near the 155.00 psychological mark, above which the USD/JPY pair could climb to the 155.40 supply zone. A sustained strength beyond the latter could lift spot prices beyond the 156.00 round figure, towards the 156.25-156.30 intermediate hurdle en route to the multi-month peak, around the 156.75 region touched last week.