Japanese Yen rallies after BoJ Governor Ueda's remarks; USD/JPY slides below mid-157.00s – FXStreet

• The Japanese yen is attracting new buyers in response to Bank of Japan Governor Ueda's hawkish comments.
• However, investors remain uncertain about the timing of the Bank of Japan's next interest rate hike.
• The risk-on mood and the recent widening of the Japan-U.S. yield gap may limit the yen's appreciation.

Following Bank of Japan Governor Kazuo Ueda's hawkish remarks, the yen appreciated across the board, and the dollar/yen pair rose to around 157.50 in the past hour. This follows overnight comments from Bank of Japan Deputy Governor Ryozo Hino, which, coupled with growing inflationary pressures within Japan, leaves the door open for further interest rate hikes in January or March, leaving the yen The height will increase.

But some investors expect the Bank of Japan to wait until spring negotiations before pulling the trigger. Furthermore, the recent widening of the Japan-U.S. yield differential due to the U.S. Federal Reserve becoming more hawkish could deter traders from making aggressive and bullish bets around the low-yielding Japanese yen. . Separately, a risk-on mood could subdue the safe-haven yen and support USD/JPY ahead of US consumer inflation data.

Japanese yen gains as Bank of Japan Governor Ueda keeps door open for rate hike next week

• Japan's household spending and real wages fell for the fourth consecutive month in November due to high prices, leaving the door open for the Bank of Japan to raise interest rates in January or March.
• Bank of Japan Deputy Governor Norami Himi on Tuesday did not strongly hint at raising interest rates next week, but said the bank would discuss the possibility of raising interest rates at its January meeting.
• Bank of Japan Governor Kazuo Ueda reiterated this Wednesday that if economic and price conditions continue to improve, the central bank will raise interest rates and adjust the degree of financial support.
• Some economists believe the Bank of Japan will evaluate U.S. President-elect Donald Trump's economic policies and wait until the results of Japan's spring wage negotiations are known in March.
• Japan's manufacturing business confidence recovered in January after falling last month, according to a Reuters Tankan poll, but the outlook remains flat due to uncertainty over President Trump's policy proposals.
• Benchmark 10-year Treasury yields are hovering near a 14-month high, with widespread expectations that the Federal Reserve will pause its rate-cutting cycle later this month.
• A modest rise in U.S. producer prices is making it difficult for investors to predict the Fed's next move on interest rates, on the back of Friday's strong U.S. non-farm jobs report.
• The Bureau of Labor Statistics (BLS) reported that the producer price index rose 3.3% year over year in December, falling short of the expected 3.4% but still a notable increase from the previous 3.0%.
• The US dollar widens its retracement decline above Monday's two-year high, creating a headwind for USD/JPY as traders look to the US Consumer Price Index for fresh stimulus. .
• U.S. headline CPI rose 0.3% in December and is expected to rise at an annual rate of 2.9% from 2.7% in November. Meanwhile, core CPI is expected to remain stable, at 3.3% year-on-year.

USD/JPY may continue to find suitable support near 157.00

From a technical perspective, bulls are likely to wait for sustained strength and acceptance above the 158.00 mark before making new bets. Given that the oscillator on the daily chart remains in positive territory and is still far from the overbought zone, we expect the USD/JPY pair to retest the multi-month top around the 158.85-158.90 zone. I might aim for it. A follow-through buy above the 159.00 mark would set the stage for further upside towards the next relevant hurdle near the mid-159.00 range before the spot price aims to recover the psychological mark of 160.00.

Conversely, the 157.45 area appears to protect the immediate downside beyond the 157.00 mark. Any further decline could be seen as a buying opportunity in the 156.25-156.20 area or near last week's swing low. This should help limit the downside of USD/JPY around the 156.00 mark, and a decisive break of this would shift the short-term bias in favor of bearish traders, paving the way for a meaningful correction downside. may be opened.