Japanese Yen weakens further below 145.00 against USD, bearish potential seems intact
|- The Japanese Yen weakens following the release of weaker domestic wage growth data.
- The prevalent cautious market mood does little to lend any support to the safe-haven JPY.
- Subdued USD price action caps gains for USD/JPY as traders await US CPI on Thursday.
The Japanese Yen (JPY) extends its depreciating move for the second straight day on Wednesday and weakens further below the 145.00 psychological mark against the US Dollar (USD) during the early part of the European session. Earlier today, the Labour Ministry reported that real wages in Japan shrank for the 20th month in November. This comes on top of falling rates of inflation in Tokyo – Japan's capital city – and reaffirms bets that the Bank of Japan (BoJ) will not pivot away from negative interest rates in January. This, in turn, is seen as a key factor that continues to undermine the JPY, which, so far, has failed to attract any haven flows amid the prevalent cautious mood around the equity markets.
The USD, on the other hand, draws some support from elevated US Treasury bond yields and remains well within the striking distance of a three-week peak set last Friday. This further contributes to the USD/JPY pair's follow-through positive move, especially after the previous day's goodish rebound from the vicinity of a technically significant 200-day Simple Moving Average (SMA). That said, the uncertainty about the Fed's rate-cut path is holding back the USD bulls from placing fresh bets and capping gains for the currency pair. Investors might also prefer to move to the sideline and look to the latest US consumer inflation figures on Thursday before positioning for the next leg of a directional move.
Daily Digest Market Movers: Japanese Yen adds to weaker domestic-data inspired losses against USD
- The Japanese Yen continues losing ground after Japan's Labour Ministry reported this Wednesday that inflation-adjusted real wages fell by 3.0% in November from a year earlier.
- Furthermore, Japanese workers' nominal pay grew by a modest 0.2% in November – marking the slowest in nearly two years – as compared to a 1.5% rise in the previous month.
- This comes on top of Tuesday's data, which showed that Tokyo's core Consumer Price Index (CPI) decelerated to the 2.1% YoY rate in December and matched a low hit in June 2022.
- This further dampens hopes for a hawkish pivot by the Bank of Japan, which regards wage trends and inflation outlooks as key factors in considering the dismantling of its negative rate policy.
- The Asahi newspaper reported that Japan's government is considering doubling budget reserves to 1 trillion Yen for the new fiscal year starting in April to cover the cost of earthquake reconstruction.
- Japanese Prime Minister Fumio Kishida's cabinet earlier on Tuesday approved 4.74 billion Yen spending from fiscal 2023/24 reserves for such aid as water, food, diapers and heaters.
- The yield on the benchmark 10-year US government bond holds steady above the 4.0% threshold amid reduced bets for an early interest rate cut and lends support to the US Dollar.
- The fundamental backdrop supports prospects for a further appreciating move for the USD/JPY pair, though bulls might wait for the US consumer inflation figures on Thursday.
Technical Analysis: USD/JPY looks to build on positive move beyond 145.00, bulls retain control
From a technical perspective, the overnight bounce from the vicinity of the very important 200-day Simple Moving Average (SMA) and a subsequent move up validates the positive outlook. Some follow-through buying beyond the 145.00 psychological mark will reaffirm the positive outlook and pave the way for additional gains. The USD/JPY pair might then climb to the 146.00 neighbourhood, or a multi-week high touched last Friday, with some intermediate hurdle near the mid-145.00s.
On the flip side, the 144.50 area now seems to protect the immediate downside ahead of the Asian session low, around the 144.30 zone. The next relevant support is pegged near the 144.00 mark, below which the USD/JPY pair could slide back to challenge the 200-day SMA, currently around the 143.35 region. A convincing break below the latter will suggest that the recent goodish recovery from a multi-month low has run out of steam and prompt aggressive technical selling.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.02% | 0.07% | -0.05% | -0.29% | 0.33% | -0.06% | 0.00% | |
| EUR | 0.02% | 0.09% | -0.03% | -0.26% | 0.35% | -0.05% | 0.03% | |
| GBP | -0.08% | -0.09% | -0.12% | -0.36% | 0.26% | -0.14% | -0.06% | |
| CAD | 0.06% | 0.05% | 0.14% | -0.22% | 0.40% | -0.01% | 0.09% | |
| AUD | 0.28% | 0.26% | 0.35% | 0.23% | 0.61% | 0.21% | 0.28% | |
| JPY | -0.33% | -0.35% | -0.26% | -0.40% | -0.62% | -0.41% | -0.32% | |
| NZD | 0.07% | 0.05% | 0.14% | 0.02% | -0.21% | 0.39% | 0.07% | |
| CHF | -0.01% | -0.02% | 0.07% | -0.06% | -0.28% | 0.33% | -0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Economic Indicator
United States Consumer Price Index (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Why it matters to traders
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
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