USD/JPY ascends mildly,lack of clarity on BoJ’s pivot weighs on the Yen

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• The USD/JPY is hovering around the 143.80 level with marginal gains recorded.
• The dovish stance from Bank of Japan and it lack of guidance weakens JPY in markets.
• PCE data on Friday from the US will likely set the pace for the upcoming sessions

The USD/JPY pair edged higher in Wednesday’s session, trading around the 143.80 level, as the markets remained directionless due to the absence of Bank of Japan’s pivot clues. To the downside, the Federal Reserve’s dovish clarity may fuel some downside in case the Personal Consumption Expenditures (PCE) November figures come lower than expected on Friday.

In addition, Japan’s weaker economy, which mirrors continual JGB yield declines, signaling that the Bank of Japan’s rate hike is still on hold, makes the JPY lose interest among investors. On the US side, its economy is holding strong, while the Fed hinted at more rate cuts than expected for 2024, which leaves the US Dollar in a challenging situation. However, as long as inflation continues to edge downwards and give markets the chance to bet on earlier rate cuts, it could pave the way for additional downside.

Presently, US bond yields are in decline. The 2-year rate declined to 4.40%, while the 5-year and 10-year yields are lower at 3.89% each. This current trend could weigh on the USD as yields and currency tend to have an inverse relationship.

For Friday, investors will eye November’s PCE figures from the US, with the headline and core figures expected to have decelerated to 2.8% YoY and 3.3% YoY.

USD/JPY levels to watch

Reflecting largely on the daily chart, the immediate short-term bias seems skewed to the upside. Specifically, the Relative Strength Index (RSI) slope is positively inclined and in the positive territory, suggesting that buying pressure has been gradually increasing, further supported by the Moving Average Convergence Divergence (MACD), which lays out decreasing red bars. However, it is crucial to understand that the current bullish momentum has not yet become sufficiently convincing.

The pair’s interaction with Simple Moving Averages (SMAs) brings in a different perspective. With the pair trading below the 20 and 100-day SMAs, bearish influences hold sway over the shorter time frames. However, the tug-of-war between bulls and bears is not entirely skewed. This is evinced by the pair being above the 200-day SMA, suggesting that the bulls aren’t out of the game on the broader scale.

Support Levels: 143.50, 143.00, 142.00.
Resistance Levels: 145.00, 145.80 (20-day SMA), 147.00.

USD/JPY daily chart