Japanese yen gets reaction from multi-month lows | 15 January 2025

Events to watch out for today:

15:30 EET. USD - Consumer Price Index

USDJPY:

The Japanese Yen (JPY) is struggling to gain significant strength and is languishing near multi-month lows against its US counterpart amid doubts over the Bank of Japan's (BoJ) rate hike plans. Signs of intensifying inflationary pressures in Japan leave the door open for a BoJ rate hike in January or March. In addition, BoJ Deputy Governor Ryozo Himino signaled on Tuesday that a rate hike remains a real possibility at the upcoming meeting. However, there was no direct indication in Himino's comments about the possibility of a rate hike in January. Moreover, some investors believe that the BOJ may wait until the spring talks before pulling the trigger.

Meanwhile, the Federal Reserve's (Fed) hawkishness in December was a key factor behind the recent rise in U.S. Treasury yields. This has widened the yield differential between the US and Japan, which in turn is seen as another factor undermining the low-yielding Japanese yen. In addition, risk-on sentiment is deterring traders from placing bullish bets on the safe-haven yen. At the same time, weak US Dollar (USD) price action acts as a headwind for the USD/JPY pair ahead of the release of the latest US consumer inflation data. The crucial Consumer Price Index (CPI) report may influence the Fed's policy course and stimulate demand for the USD.

Trading recommendation: Trade mainly with Sell orders from the current price level.

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