The yen is trying to break a series of setbacks against the dollar | 07 October 2024

USDJPY:

The USD/JPY pair cannot take advantage of the modest rise in the Asian session or find support above 149.00 and is retreating a few pips from the highest level since 16 August reached on Monday. Prices are dipping below 148.50, or a fresh daily low in the last hour, and for the moment appear to have broken the dollar's three-day winning streak, although the fundamental backdrop warrants caution from bearish traders.

Japan's Deputy Finance Minister for International Affairs Atsushi Mimura said that the government will keep an eye on currency movements, including speculative moves, fuelling speculation of possible intervention. This, in turn, provides some support for the Japanese Yen (JPY) and attracts sellers to the USD/JPY pair. Meanwhile, the decreasing chances of another interest rate hike by the Bank of Japan (BoJ) in 2024 and a more aggressive easing policy from the Federal Reserve (Fed) should continue to serve as a tailwind for the currency pair.

Japan's new Prime Minister Shigeru Ishiba stunned markets last week by stating that the economy is not ready for further rate hikes. In addition, political uncertainty ahead of the 27 October general election may keep JPY bulls on the sidelines. Meanwhile, good US monthly employment data released on Friday made investors further lower their bets on a massive Fed rate cut in November. This helped the US Dollar (USD) maintain its recent strong rise to a seven-week high and should serve as a tailwind for the USD/JPY pair.

This in turn suggests that any subsequent decline could still be seen as a buying opportunity, so it is prudent to wait for strong follow-through selling before confirming that the uptrend from a week ago has exhausted itself. As for further developments, there are no major economic data releases on Monday that could influence the market. Nevertheless, speeches by influential FOMC members may have an impact on the USD later in the North American session. In addition, geopolitical events should give a short-term impetus to the USD/JPY pair.

Trading recommendation: Trade mainly with buy orders at the price level of 148.75. We consider sell orders at the price level of 148.05.

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