Japanese Yen edges higher against USD amid intervention fears, lacks bullish conviction – FXStreet

• The Japanese yen is supported due to concerns about the possibility of government intervention.
• The uncertainty of the Bank of Japan's rate hike and the risk-on environment should limit the value of the safe-haven yen.
• A rise in US bond yields could provide a tailwind for the USD/JPY ahead of the Fed's decision.

The Japanese yen (JPY) continues to hold an advantage against the US yen heading into European trading on Thursday amid speculation that Japanese authorities will intervene to support the country's currency. This, along with a modest decline in the US dollar (USD), turned out to be a key factor putting some pressure on the USD/JPY pair. However, uncertainty about the Bank of Japan's (BOJ) interest rate hike plans makes it seem unlikely that the yen will recover meaningfully from Wednesday's lowest levels since July 30.

Furthermore, the underlying bullish trend in global stock markets as a whole is expected to continue to suppress the upward value of the Japanese yen, which is a safe-haven asset. Meanwhile, expectations for higher growth and inflation under the Trump administration support expectations that the Federal Reserve will slow its rate of rate cuts. This should keep U.S. bond yields in line, continuing to support the U.S. dollar and help keep the low-yielding yen in check. Traders may want to wait for the results of the Federal Open Market Committee (FOMC) meeting later today.

Daily Digest Market movers: Japanese yen lacks bullish conviction amid uncertainty over Bank of Japan interest rate hike and positive risk tone

• Japan's Chief Cabinet Secretary Yoshimasa Hayashi reiterated on Wednesday that the government will closely monitor movements in the foreign exchange market, including speculative movements, with a heightened sense of urgency.
• In addition, Jun Mimura, Japan's vice minister of finance, international affairs and top foreign exchange official, said on Thursday that the government is ready to take appropriate measures against excessive exchange rate fluctuations if necessary.
• Japan's Finance Minister Katsunobu Kato said on Thursday that it is important to achieve fiscal consolidation while strongly promoting economic recovery, and that Japan must seize this opportunity to overcome deflation.
• The minutes of the Bank of Japan's meeting in September showed that the Bank of Japan plans to raise policy interest rates in stages, although it remains cautious about uncertainties in overseas economies, particularly in the United States.
• However, investors appear to believe that Japan's political uncertainty may make further monetary tightening by the Bank of Japan difficult, which, along with a risk-on mood, will hurt the Japanese yen.
• The U.S. dollar posted its biggest single-day gain since September 2022 and hit its highest since July on hopes that President Donald Trump's policies will boost inflation and slow the pace of interest rate cuts. .
• Additionally, the so-called Trump trade revival triggered a sell-off in the U.S. bond market, with the benchmark 10-year Treasury yield rising to 4.45%, the highest level since July.
• As a result, the Japan-U.S. interest rate differential may widen further and continue to weigh on the low-yielding Japanese yen, suggesting that the path of least resistance for the USD/JPY pair is upwards.

Technical outlook: USD/JPY correction slide may still be seen as a buying opportunity

From a technical perspective, the overnight break above the 153.80-153.85 supply zone and subsequent strength above the 154.00 mark was seen as another catalyst for bullish traders. Furthermore, the oscillator on the daily chart remains in positive territory and has not entered the overbought zone yet. This further confirms the short-term positive outlook for the USD/JPY pair and supports the prospect of a move towards a recovery of the psychological mark 155.00. This momentum could further expand towards the next relevant hurdle around 155.45-155.50.

On the contrary, the round number of 154.00 could provide immediate support to the USD/JPY pair. A follow-through sell below the resistance-to-support at 153.85-153.80 could push the spot price to the 153.25 area on its way to the 153.00 mark, followed immediately by the 152.75 support. Further correctional declines could still be seen as a buying opportunity and are likely to be confined around the 152.00 round number.