Japanese Yen climbs to five-week high due to USD weakness

The USD/JPY pair has dropped to 151.56, marking a five-week high for the yen. Market speculations fuel the currency's strength that the Bank of Japan (BoJ) might consider an interest rate hike as soon as December. This speculation was further supported by comments from BoJ Governor Kazuo Ueda, who acknowledged the need for potential rate adjustments due to the yen's weakening.

Currently, the market assigns a 60% probability to a 25-basis-point rate hike in December, an increase from last week's 50%. The shift in expectations is highly influenced by the upcoming release of Tokyo inflation data on Friday. This data will serve as a crucial indicator of Japan's overall consumer price trends and potentially shape future BoJ monetary policies.

Additionally, the yen's recent gains are bolstered by a general weakening of the US dollar, which has seen reduced positions ahead of the Thanksgiving holiday and subsequent limited trading on Friday. The demand for the yen as a safe-haven asset has also diminished as tensions in the Middle East show signs of normalisation, reducing the allure of safe-haven investments.

Technical analysis of USD/JPY

On the H4 chart, USD/JPY has broken down past the 153.00 level and is progressing downward, targeting 149.90. If this level is reached, a rebound to 152.70 is anticipated before another potential decline to 149.12. This bearish USD/JPY predictions is supported by the MACD indicator, with its signal line below zero and trending sharply downwards.

The H1 chart shows that after forming a consolidation range around 152.70, the pair has moved downward, reaching 150.50. A corrective move to 152.70 may occur today, followed by a further descent to 149.50, ultimately aiming for a continuation to 149.12. The Stochastic oscillator, positioned below 80 and pointing downward, corroborates this expected downward movement, indicating continued bearish momentum for the USD/JPY pair.