Japanese Yen sticks to Tokyo CPI-led gains, stands firm near one-month top against USD

• The Japanese Yen rallied as a stronger Tokyo CPI lifted December BoJ rate hike bets.
• The USD languishes near a two-week trough and contributes to USD/JPY’s downfall.
• The technical setup supports prospects for a further depreciation in the currency pair.

The Japanese Yen (JPY) strengthens across the board following the release of strong November consumer inflation figures from Tokyo, Japan’s capital, which backs the case for another Bank of Japan (BoJ) interest rate hike in December. Furthermore, trade war fears and persistent geopolitical risks stemming from the protracted Russia-Ukraine war boost demand for the traditional safe-haven JPY. 

Meanwhile, Scott Bessent’s nomination as the US Treasury secretary led to the recent downfall in the US Treasury bond yields, which is seen as another factor lending support to the lower-yielding JPY. The US Dollar (USD), on the other hand, languishes near a two-week low amid bets that the Federal Reserve (Fed) will cut rates in December and drags the USD/JPY pair to its lowest level since October 21. 

The Japanese Yen draws support from rising BoJ rate hike bets, safe-haven flows

• The Statistics Bureau of Japan reported on Friday that the headline Tokyo Consumer Price Index (CPI) surged 2.6% year-on-year in November as compared to 1.8% in the previous month.
• Meanwhile, core CPI, which excludes volatile fresh food items, rose 2.2% YoY and a gauge that strips out both energy and fresh food costs also climbed by 2.2% during the reported month. 
• A separate report showed Japan’s Unemployment Rate edged higher as expected, to 2.5% in October and Retail Sales grew 1.6% YoY as compared to 0.5% in September and 2.2% expected. 
• Adding to this, Japan’s Industrial Production registered strong growth of 3% in October as compared to 1.6% in the previous month, though the reading was short of the 3.9% rise anticipated. 
• Nevertheless, stronger inflation figures continue to fuel speculations that the Bank of Japan (BoJ) will hike interest rates again at its next monetary policy meeting in December. 
• Adding to this, worries that US President-elect Donald Trump’s trade tariffs will affect the global economy and the protracted Russia-Ukraine war weigh on the market sentiment. 
• The US bond investors cheered the nomination of Scott Bessent, who is seen as a fiscal conservative and will likely want to keep a leash on US deficits, as the US Treasury Secretary. 
• This keeps the benchmark 10-year US Treasury bond yields and the US Dollar depressed near a two-week low, which is seen exerting additional pressure on the USD/JPY pair. 

USD/JPY bears await acceptance below the 150.00 mark before placing fresh bets

From a technical perspective, an intraday breakdown below the 38.2% Fibonacci retracement level of the September-November rally and the 150.00 mark could be seen as a key trigger for bearish traders. Moreover, oscillators on the daily chart have been gaining negative traction and are still away from being in the oversold zone. This, in turn, supports prospects for a further near-term depreciating move for the USD/JPY pair, towards the next relevant support near the 149.45 region. The downward trajectory could extend further to the 148.00 neighborhood, or the 50% retracement level.

On the flip side, the previous monthly trough, around the 150.45 zone, now seems to act as an immediate hurdle ahead of the 152.00 mark. The latter coincides with the very important 200-day Simple Moving Average (SMA) support breakpoint and should act as a key pivotal point. A sustained strength beyond might trigger a short-covering rally towards the 152.65-152.70 intermediate hurdle en route to the 153.00 round figure and the 153.30-153.35 congestion zone.