USD/JPY price holds near 3-week high as Japan’s M2 growth misses forecasts
Fed's tighter policy supports dollar as USD/JPY faces resistance at 155.00 level
USD/JPY began the week on a firm footing, jumping 1% from Monday’s 152.60 level to 154.20 by Tuesday. However, this latest rise still places the currency pair within a three-week range, held between 151.70 at the low end and 155.00 at a strong resistance level on the upside. This reflects indecision from both bullish and bearish market participants who are on the lookout for any clear signals from the Bank of Japan (BoJ) that could lead the pair out of this tight consolidation zone.
Limited money supply growth adds pressure to the Yen
Adding to the yen’s subdued performance, Japan’s latest M2 Money Stock data for October came in weaker than anticipated, growing by only 1.3% instead of the expected 1.5%. This slower-than-expected expansion points to limited liquidity within Japan’s economy, a factor that generally keeps inflation and interest rates low. Such restrained growth in the money supply makes it less likely that the BoJ will shift from its dovish stance anytime soon, encouraging traders to lean toward a bullish view on USD/JPY as the dollar gains an edge.
This dovish approach by the BoJ contrasts sharply with the Federal Reserve’s stance. Although the Fed has taken a cautious tone on future rate hikes, its policy remains generally tighter than that of the BoJ, creating a wide interest rate differential. This difference strengthens the dollar, providing continued support for USD/JPY at higher levels. Still, with both central banks remaining indecisive, the pair has yet to break out of its range.
For now, the 155.00 mark serves as a major ceiling for the pair, while 151.70 provides a key support level. A breakout above or below this range could set the next directional cue for the 4th quarter of the year.
USD/JPY rise heightens inflation concerns for the Bank of Japan. A weak yen, hovering near 150 per dollar, makes imported goods more expensive.
