USD/JPY Extends Corrective Pullback Above Mid-149.000s As BoJ Meeting Minutes Reveal Further Monetary Policy Easing Ahead
Key Takeaways:
- USD/JPY witnessed fresh buying on Monday and extended the corrective pullback above the mid-149.000s
- BoJ meeting minutes reveal the Japanese central bank is set to patiently continue with monetary policy easing, which weighs on the yen
- A fresh leg up in the U.S. Treasury bond yields, which, along with a softer risk tone, offered some support to the safe haven-green back
The USD/JPY cross staged a modest recovery from early 149.000 levels on Monday during the Asian session, and for now, it seems to have snapped a three-day losing streak. When speaking, the shared currency is up over 30 pips for the day, trading above mid-149.000 levels, and looks set to build on its intraday ascent heading into the European session.
The minutes of the Bank of Japan (BoJ) Monetary Policy meeting released earlier today showed sustainable and stable achievement of the price stability target, accompanied by wage increases, had yet to come into sight in Japan. The Bank of Japan needed to patiently continue with monetary easing under yield curve control, which in turn was seen as a key factor that weighed on the Japanese yen and helped limit further losses around the USD/JPY pair.
The minutes come a week after the BoJ announced during its October meeting that it had kept its key short-term interest rate unchanged at -0.1% and that of 10-year bond yields at around 0%. At the same time, the central bank redefined 1.0% as a loose "upper bound" rather than a rigid cap and scrapped a pledge to guard the level.
That said, further contributing to the sentiment around the USD/JPY cross is the fresh leg up in the U.S. Treasury bond yields, which, along with a softer risk tone, offered some support to the safe haven-green back. This comes from a cooler-than-expected U.S. Jobs data report, which showed the U.S. economy added 150K jobs in October 2023, about half of a downwardly revised 297K in September, and below market forecasts of 180K.
Additionally, the unemployment rate in the United States increased to 3.9% in October 2023, slightly exceeding market expectations and the previous month's figure of 3.8%. Moreover, average hourly earnings for all employees on private nonfarm payrolls went up by 7 cents, or 0.2% over a month, to $34.00 in October 2023, after an upwardly revised 0.3% increase in September and just below market estimates of 0.3%. Over the past 12 months, average hourly earnings have risen by 4.1%, the smallest increase since June 2021, following an upwardly revised 4.3% rise in September and slightly above market forecasts of a 4% gain.
Elsewhere, an Institute for Supply Management (ISM) report released on Friday showed the U.S. ISM Services PMI fell to 51.8 in October 2023, the lowest in five months and way below forecasts of 53.
As we advance, without any significant economic news data from both dockets, the broader market risk sentiment and U.S. Treasury bond yields will continue to influence the U.S. dollar and provide short-term trading opportunities around the USD/JPY pair. The main focus, however, remains on Fed Chair Jerome Powell's speech, which is set for release on Wednesday and Thursday.
Technical Outlook: Four-Hours USD/JPY Price Chart
From a technical standpoint, the USD/JPY cross has extended the modest bounce from the vicinity of the 149.190 level and is trading with modest gains above the mid-149.000 level. Some follow-through buying would uplift spot prices toward the immediate hurdle at the 149.843 level. A clean move above this barricade could see the USD/JPY pair extend its bullish pullback above the 150.000 round mark toward tagging the 20 (blue) and 50 (red) day EMA crossover at 150.612 before ascending to retest the key resistance level plotted by a downward sloping trendline extending from the early-November 2023 swing high. A subsequent break (bullish price breakout) above this resistance level could see the USD/JPY cross extend its corrective move toward attacking the 50% and 61.8% Fibonacci retracement levels at 150.428 and 150.728, respectively. A convincing move above these levels will act as a fresh trigger for new buyers to jump in and push the price further. The bullish trajectory could then be extended above the 151.000 mark toward the 151.704 resistance level.
On the flip side, if sellers resurface and spark a bearish turnaround, initial support comes in at the key support level plotted by an ascending trendline extending from the late-October 2023 swing low. A clean break (bearish price breakout) below this support level will pave the way for a move toward confronting the technically strong 200-day (yellow) EMA level at 149.149. A convincing move below this key barricade will pave the way for an accelerated decline toward the 149.057 support level (S1) before dropping further below the 149.000 mark toward the 148.792 support level. In dire cases, the USD/JPY cross could drop further toward the 1480.000 round mark.