Japanese Yen ticks lower against USD, remains close to over two-month low ahead of US PPI – FXStreet

• Amid uncertainty about the Bank of Japan's interest rate hike, the Japanese yen has been unable to extend its overnight appreciation.
• A modest rise in the USD further supports USD/JPY regaining some positive traction on Friday.
• A weakening risk tone could limit the yen's losses ahead of the US PPI report and put a cap on spot prices.

The Japanese yen (JPY) fell against the US yen on Friday, stalling its recovery from the previous day's lows since early August. In addition to Prime Minister Shigeru Ishiba's frank comments on monetary policy, Japan's real wages have fallen for the first time in three months, household spending has declined, and price pressures from raw material costs are beginning to subside, raising doubts about the Bank of Japan's monetary policy. Ta. (Bank of Japan) Interest rate hike plan. This has helped the USD/JPY pair attract some bullish buying as the JPY weakens and the US dollar (USD) rises modestly.

Despite confidence that the Federal Reserve will continue to cut interest rates amid signs of weakness in the labor market, traders are fully pricing in the possibility of more aggressive policy easing. This will help limit the USD's corrective pullback from Thursday's nearly two-month high and provide some support for the USD/JPY pair. That said, if the risk tone weakens, losses for the safe-haven Japanese yen will be limited, potentially limiting price movements in the currency pair ahead of the release of the US Producer Price Index (PPI) later this Friday. be. Nevertheless, the fundamentals suggest that the path of least resistance for spot prices is to the upside.

Daily Digest Market Movers: Japanese yen remains defensive as Bank of Japan uncertainty and expectations for Fed rate cut decline

• Expectations that the Bank of Japan is in no hurry to raise borrowing costs will not help capitalize on the Japanese yen's gradual recovery against the dollar from Thursday's lowest in more than two months.
• Additionally, political uncertainty ahead of Japan's snap general election on October 27th and an overall positive risk tone could dampen demand for the yen and continue to provide a tailwind for the USD/JPY pair.
• The dollar rose to its highest level since mid-August after the U.S. Labor Department said the core consumer price index, which excludes food and energy prices, rose at an annualized rate of 3.3% in September.
• Meanwhile, the headline CPI rose 2.4% in the 12 months to September, compared to an expected 2.3%. However, this was lower than the 2.5% in August, and the year-on-year increase was the smallest since February 2021.
• Additionally, the number of Americans filing for unemployment benefits rose by 33,000 in the week ending October 5 to a seasonally adjusted 258,000, an early sign of weakness in the U.S. labor market. showed.
• Investors now appear confident that the Federal Reserve will continue to cut interest rates, leading USD bulls to take a defensive stance ahead of the US Producer Price Index (PPI) release scheduled for later this Friday. I keep it.

Technical Outlook: Bullish potential for USD/JPY remains above 148.00, buying on the dip should help limit losses

From a technical perspective, last week's move was sustained above the 50-day simple moving average (SMA) for the first time since mid-July and above the 38.2% Fibonacci retracement level of the July-September decline. That favors the bulls. Furthermore, the oscillator on the daily chart has gained positive traction and is far from overbought territory, suggesting that the path of least resistance for the USD/JPY pair is to the upside. Therefore, any subsequent decline is likely to attract new buyers and should stay near the 148.00 mark.

The latter should serve as an important key point, and a break through it could prompt a technical sell-off and drag the USD/JPY pair to the intermediate support at 147.35 on its way to the 147.00 mark and 146.50 area. On the flip side, the round number of 149.00 now appears to be acting as an impending hurdle ahead of overnight swing highs around 149.55-149.60, and bulls may aim to regain the psychological mark of 150.00. I don't know. This momentum could further expand towards 50% Fibonacci. Level, around 150.75-150.80.