Japanese Yen struggles to lure buyers; USD/JPY climbs back closer to mid-154.00s

• The Japanese Yen fails to capitalize on its modest intraday gains amid BoJ rate hike uncertainty. 
• Reduced bets for aggressive Fed rate cuts revive the USD demand and lend support to USD/JPY.
• Intervention fears and geopolitical risks could help limit any further losses for the safe-haven JPY. 

The Japanese Yen (JPY) surrenders a major part of intraday gains against its American counterpart, pushing the USD/JPY pair closer to mid-154.00s heading into the European session on Tuesday. The uncertainty over the timing of another interest rate hike by the Bank of Japan (BoJ), along with a generally positive risk tone, turn out to be key factors undermining the safe-haven JPY. Adding to this, the emergence of some US Dollar (USD) dip-buying contributes to the pair's intraday bounce of around 50 pips from sub-154.00 levels.

Investors seem convinced that US President-elect Donald Trump's touted policies will be inflationary and limit the scope for further easing by the Federal Reserve (Fed). This, in turn, assists the USD to stall its profit-taking slide from the year-to-date high touched last week and offers support to the USD/JPY pair. However, speculations that Japanese authorities might intervene in the FX market to prop up the domestic currency, geopolitical risks and softening US Treasury bond yields should limit JPY losses and cap the currency pair. 

Japanese Yen bulls remain on the sidelines amid BoJ uncertainty

• Bank of Japan Governor Kazuo Ueda said on Monday that the economy was progressing towards sustained wages-driven inflation, leaving the door open for further monetary policy tightening. 
• Ueda, however, provided few clues on whether the BoJ would raise rates in December and said that the gradual approach to adjusting policy is contingent on economic activity and price trends.
• Japan's Economy Minister Ryosei Akazawa said on Tuesday that it is crucial to boost pay for all generations with the economic package and that he is aiming for cabinet approval of the economic package soon.
• Geopolitical uncertainties stemming from the protracted Russia-Ukraine war and the ongoing conflicts in the Middle East offer some support to the safe-haven Japanese Yen amid intervention fears. 
• Japan's Finance Minister Katsunobu Kato warned last Friday that the government will scrutinize the FX market with very high vigilance and take appropriate action against excessive moves.
• Japan’s Finance Minister Katsunobu Kato reiterated that there is no change to the government's stance on forex and authorities will continue to take appropriate action against excessive moves.
• A modest pullback in the US Treasury bond yields prompted some follow-through US Dollar profit-taking, after the post-US election blowout rally to a fresh year-to-date peak set last week. 
• US President-elect Donald Trump's incoming administration is expected to focus on lowering taxes and raising tariffs, which could stoke inflation and limit the Federal Reserve's ability to cut rates.
• A slew of influential FOMC members, including Fed Chair Jerome Powell, recently suggested caution in cutting rates, which, in turn, favors the USD bulls and should cap the lower-yielding JPY. 
• Japan's National Consumer Price Index (CPI) is due for release on Friday and will influence the JPY price dynamics ahead of the global manufacturing and service sector PMI prints.

USD/JPY needs to find acceptance below 154.00 for bears to seize control

From a technical perspective, the USD/JPY pair's failure to find acceptance above the 155.00 psychological mark on Monday and the subsequent pullback warrants caution for bullish traders. Spot prices, however, might continue to find support near the 153.85 region on the back of positive oscillators on the daily chart. Some follow-through selling should pave the way for additional losses towards the 153.25 region en route to the 153.00 mark and the next relevant support near the 152.70-152.65 area. A convincing break below the latter might expose the very important 200-day Simple Moving Average (SMA) resistance breakpoint, now turned support, currently pegged near the 151.90-151.85 region.

On the flip side, the 155.00 mark, followed by the overnight swing high, around the 155.35 region could act as an immeidate hurdles. A sustained strength beyond the latter will reaffirm the near-term positive outlook, which should allow the USD/JPY pair to surpass the 155.70 intermediate hurdle and aim towards reclaiming the 156.00 round figure. The momentum could extend further towards retesting the multi-month top, around the 156.75 region touched last Friday.