Japanese Yen drifts lower amid fading hopes for more BoJ rate hikes, ahead of FOMC minutes – FXStreet

• The Japanese yen is attracting some sellers due to uncertainty surrounding the Bank of Japan's further interest rate hike.
• Hopes for a possible ceasefire between Hezbollah and Israel further undermine the safe-haven Japanese yen.
• There are concerns that the intervention will limit USD/JPY as demand for the dollar weakens ahead of the FOMC meeting.

The Japanese yen (JPY) fell against the US yen on Wednesday, near its lowest since August 16, hit earlier this week. Japan's real wages fell in August after two months of wage increases, while household spending also fell, data released on Tuesday showed, pointing to strong consumer spending and a sustained economic recovery. Questions have arisen. This, in addition to frank comments on monetary policy by Japan's new prime minister, is expected to increase uncertainty over the Bank of Japan's (BOJ) plans for further interest rate hikes, which in turn is expected to weigh on the yen.

Additionally, news of a possible ceasefire between Hezbollah and Israel hurt demand for the safe-haven Japanese yen. Meanwhile, the U.S. dollar (USD) is nearing a seven-week high hit last Friday as hopes for more aggressive policy easing from the Federal Reserve fade. This will cause the USD/JPY pair to rise above mid-148.00 yen heading into European trading. However, there are concerns that Japanese authorities may step in to support the country's currency, and it remains to be seen whether the bulls will be able to capitalize on the move ahead of the release of the FOMC minutes during the North American session. I don't know yet.

Daily Digest Market Movers: Japanese yen approaches weekly low as traders scale back bets on further BOJ rate hikes

• Real wages in Japan, the world's fourth-largest economy, fell 0.6% in August from the same month last year, and household spending fell 1.9%, according to government statistics released on Tuesday.
• This, combined with comments from Japanese Prime Minister Shigeru Ishiba that the country is not in a position to raise rates further, could derail the Bank of Japan's rate hike plans in the coming months.
• Israeli forces made a new incursion into southern Lebanon on Tuesday, raising the risk of a full-scale war in the Middle East, while Iran-backed Hezbollah left the door open to a negotiated ceasefire. My concerns were allayed.
• Japan's Finance Minister Katsunobu Kato said earlier this week that the government would closely monitor how rapid currency fluctuations could affect the economy and take measures as necessary.
• Japan's manufacturing industry showed more confidence in business conditions in October, with the sentiment index rising to 7 this month from 4 in September, according to the Reuters Tankan monthly poll on Wednesday.
• However, the survey showed that Japanese manufacturers remain wary of the pace of China's economic recovery, and the mood in the services sector has eased, reflecting Japan's patchy economic situation.
• The US dollar is trading near seven-week highs, with little impact on the USD/JPY pair as the chances of more aggressive policy easing by the US Federal Reserve diminish. .
• Traders are now looking forward to the release of the FOMC's September minutes for some stimulus ahead of Thursday and Friday's U.S. Consumer Price Index and Producer Price Index.

Technical Outlook: USD/JPY needs to be accepted above the 149.00 mark for bulls to take short-term leadership

From a technical perspective, the emergence of some bullish buying on Tuesday came after the market moved above its 50-day simple moving average (SMA) last week for the first time since mid-July, favoring bullish traders. It has become. Moreover, the spot price now appears to be accepted above the 148.00 mark, or the 38.2% Fibonacci retracement level of the July-September decline. This, combined with the fact that the oscillator on the daily chart is gaining positive traction, suggests that the path of least resistance for the USD/JPY pair is to the upside. However, further upside could face resistance around the 148.70 zone before the 149.00 round figure. A follow-through buying above the weekly top near the 149.10-149.15 area would reaffirm the positive outlook and allow a return to the psychological mark of 150.00.

Conversely, the overnight swing low, around 147.35-147.30, now appears to be protecting the immediate downside ahead of the 147.00 mark. A solid break below the latter could drag the USD/JPY pair to the intermediate support at 146.45 on its way to the 146.00-145.90 region and confluence support at 145.00. The latter consists of a 50-day SMA and a 23.6% Fibo. A decisive break below this level would signal that the recent recovery from near the mid-139.00s, or 14-month lows, has run its course and the short-term bias has shifted in favor of bearish traders.