USD/JPY price tests 154 support as yen rises on CPI data
USD/JPY nears 154.00 amid yen strength and BOJ signals
βUSD/JPY price has experienced back-and-forth volatility this week, hovering around the critical 154.00 support level. Bulls and bears have fiercely contested this zone, creating a tug of short-lived rallies and repeated tests of the support level. On Thursday, the yenβs strength pushed USD/JPY lower, with bears eyeing a decisive break below 154.
A drop below 154.00 would mark a significant shift, positioning USD/JPY for its lowest close in nine days at levels below 153.300. This bearish pressure aligns with growing confidence in the yen supported by Japanβs latest inflation data and because the Bank of Japan could take a more hawkish stance in the coming months.
USD/JPY price analysis (September-November 2024). Source: TradingView.
Japanβs October inflation data released Friday showed a 2.3% rise in consumer prices excluding fresh food, exceeding expectations of 2.2%. This marked a slight deceleration from Septemberβs 2.4%, largely due to slower energy price growth. However, the underlying price momentum remained firm, driven by processed food prices surging 3.8% and service prices climbing to 1.5%.
Speculative positions and policy speculation shape USD/JPY outlook
The report bolsters the view that inflation in Japan is becoming more entrenched, keeping the Bank of Japan on track for potential rate hikes in December or January. Governor Kazuo Uedaβs recent comments about considering the yenβs impact on growth and prices have further fueled expectations of a policy shift.
On the dollar side, the currency remains supported by higher U.S. bond yields, which rose sharply following the Federal Reserveβs decision to cut rates in September. The dollar has climbed 10% against the yen this year, driven by these elevated yields despite Japanβs inflationary trends and BOJ speculation. Yet, the yen appears ripe for a rebound due to speculative short positions on the yen which has hit a four-month high, adding to the potential for an unwind that could further pressure USD/JPY.
If bears manage to break below 154.00, USD/JPY could see significant selling pressure, potentially closing the week below 153.300. On the other hand, any signs of dollar strength or hesitation from the Bank of Japan may keep USD/JPY above the 154.00 critical threshold, maintaining the pair's overall uptrend outlook.
Bank of Japan Governor remarks have raised speculation of a potential 25-basis-point rate hike in December. This has left investors uncertain about the USD/JPY market sentiment.
