Japanese Yen strengthens against USD ahead of BoJ Governor Ueda's press conference

31 Oct 2024, 02:18 by Haresh Menghani · FXStreet

The Japanese Yen edges higher after the BoJ decided to leave policy settings unchanged.
The uncertainty over further BoJ rate hikes should keep a lid on any further JPY gains.
The emergence of some USD buying might contribute to limiting losses for USD/JPY.
Traders now look to the BoJ's post-meeting presser ahead of the US PCE Price Index.

The Japanese Yen (JPY) attracts some buyers after the Bank of Japan (BoJ) announced its decision earlier this Thursday and drags the USD/JPY pair back below the 153.00 mark in the last hour. Any meaningful JPY appreciation, however, still seems elusive as investors now seem convinced that Japan's political landscape could make it difficult for the BoJ to tighten its monetary policy further.

Apart from this, a further rise in the US Treasury bond yields, bolstered by bets for smaller rate cuts by the Federal Reserve (Fed) and deficit-spending concerns after the US election, should cap the lower-yielding JPY. Furthermore, the emergence of some US Dollar (USD) dip-buying could limit the downside for the USD/JPY pair ahead of the US Personal Consumption Expenditure (PCE) Price Index.

Daily Digest Market Movers: Japanese Yen gains positive traction after BoJ's on hold decision

The Bank of Japan decided to leave its monetary policy settings unchanged amid a rare political turmoil after Sunday’s snap election in Japan that snatched the Liberal Democratic Party’s majority for the first time in 15 years.
Government data showed this Thursday that Japan's Industrial Production bounced after declining by 3.3% in August and rose 1.4% in September. The report also revealed that companies expect production to increase by 8.3% in October.
A separate government report showed that Retail Sales increased by 0.5% from a year earlier in September, marking a sharp deceleration from the 3.1% rise in the previous month and pointing to a loss of momentum in consumption.
The US Dollar attracts some dip-buying and reverses a part of the previous day's modest decline led by mixed economic data, which, in turn, keeps the USD/JPY pair close to its highest level since July 31 touched earlier this week.
The Automatic Data Processing (ADP) reported on Wednesday that private sector employers added 233K new jobs in October, better than the previous month's upwardly revised reading of 159K and surpassing optimistic estimates.
The growth in employment is expected to boost consumer spending and contribute to overall growth, validating the view that the economy remains on strong footing and that the Federal Reserve will proceed with smaller rate cuts.
Separately, the US Bureau of Economic Analysis' initial estimate suggested that the world's largest economy expanded by a 2.8% annualized pace during the third quarter, slower than the 3% growth recorded in the previous quarter.
The markets are pricing in the possibility that the Fed will lower borrowing costs by 25 basis points in November, which, along with deficit-spending concerns after the US election, remains supportive of elevated US bond yields.
Later during the early North American session, the release of the Personal Consumption Expenditure (PCE) Price Index could provide fresh cues about the Fed's interest rate outlook and influence the USD price dynamics.

Technical Outlook: USD/JPY corrective decline could be seen as a buying opportunity and remain limited

From a technical perspective, the recent repeated failures to find acceptance beyond the 61.8% Fibonacci retracement level of the July-September downfall warrant some caution for bulls. Moreover, the Relative Strength Index (RSI) on the daily chart is on the verge of breaking into the overbought zone. This further makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for additional gains.

In the meantime, weakness below the 153.00 mark might continue to find some support near the 152.75-152.65 region ahead of the 152.40 area or the weekly low. Some follow-through selling could drag the USD/JPY pair to the 152.00 mark en route to the 151.45 support and the 151.00 mark. The downward trajectory could extend further towards challenging the 150.65 confluence resistance breakpoint, which should now act as a key pivotal point and a strong base for spot prices.

On the flip side, the 153.85-153.90 region now seems to have emerged as an immediate strong barrier. A sustained strength beyond, leading to a breakout through the 154.00 round-figure mark, has the potential to lift the USD/JPY pair towards the 154.35-154.40 supply zone en route to the 155.00 psychological mark. Spot prices could extend the momentum and eventually climb to test the late-July swing high, around the 155.20 region.

Economic Indicator

BoJ Press Conference

The Bank of Japan (BoJ) holds a press conference at the end of each one of its eight scheduled policy meetings. At the press conference the Governor of the BoJ communicates with media representatives and investors regarding monetary policy. The Governor talks about the factors that affect the most recent interest rate decision, the overall economic outlook, inflation, and clues regarding future monetary policy. Hawkish comments tend to boost the Japanese Yen (JPY), while a dovish message tends to weaken it.