USD/JPY ANALYSIS & TALKING POINTS

• Japanese inflation keeps pressure on BoJ to shift policy.
• Strong emphasis on US economic data that includes core PCE.
• Upside risks remain despite solid start to the week for the yen.

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JAPANESE YEN FUNDAMENTAL BACKDROP

The Japanese Yen ended the trading week on a muted tone due to the US Thanksgiving Day hangover but Friday held some key information to factor into the Bank of Japan’s (BOJ) analysis. Once again, headline inflation held above the 2% whilst beating estimates and remaining above 3%. Remember the BoJ consistently reinforces the fact that they want to see sustained +2% inflation thus increasing the likelihood of a policy shift. A hawkish move will aid the yen and conclude negative interest rates policy.

Money market pricing (see table below) forecasts a rate hike towards the latter part of 2024 as but incoming data will remain highly influential and could drastically change expectations as we have seen with many central banks this year.

BANK OF JAPAN INTEREST RATE PROBABILITIES

Source: Refinitiv

USD/JPY TECHNICAL ANALYSIS

USD/JPY DAILY CHART

Chart prepared by Warren Venketas, IG

Daily USD/JPY price action has been respectful of the 50-day moving average (yellow) of recent with the Relative Strength Index (RSI) now favoring bearish momentum short-term. That being said, last week’s weekly candle close formed a hammer-like candlestick that could suggest a longer-term bullish preference. The last few daily candles now resemble an ascending triangle type pattern – another bullish advocate.

Key resistance levels:

• 151.95
• 150.00

Key support levels:

• 148.16
• 50-day moving average (yellow)
• 147.37
• 145.91
• 145.00

IG CLIENT SENTIMENT: MIXED

IGCS shows retail traders are currently net SHORT on USD/JPY, with 81% of traders currently holding short positions (as of this writing).

https://www.dailyfx.com/news/forex-usd-jpy-weekly-forecast-boj-policy-change-reinforced-by-japanese-cpi-wv-20231127.html