Japanese Yen remains depressed amid diminishing odds for an early BoJ pivot,

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• The Japanese Yen gives up some of its recent strong gains against the US Dollar.
• Reduced bets for an imminent shift in the BoJ’s policy shift undermine the JPY.
• The USD draws support from Friday’s better-than-expected US monthly job data.
• The market attention now shifts to the US CPI and the FOMC decision this week.

The Japanese Yen (JPY) continues losing ground against the US Dollar (USD) for the second successive day on Monday and is pressured by a combination of factors. A report on Friday indicated that Bank of Japan (BoJ) Governor Kazuo Ueda’s comments last week were taken out of context and not meant to signal anything about the timing of a policy change. Adding to this, the weaker GDP report pointed to Japan’s still fragile economy and suggested that market expectations of an imminent rate hike may be overblown, which, in turn, undermines the JPY.

The USD, on the other hand, draws support from stronger monthly employment figures released on Friday, which forced traders to bet that it could take the Federal Reserve (Fed) until May to begin a series of interest-rate cuts next year. This, in turn, assists the USD/JPY pair to build on Friday’s goodish rebound from the vicinity of a multi-month trough and climb further beyond mid-145.00s during the Asian session on Monday. That said, concerns about a deeper global economic downturn and geopolitical risks, could limit losses for the safe-haven JPY.

Traders might also refrain from placing aggressive directional bets around the USD/JPY pair and prefer to wait for this week’s key data/event risks. The latest US consumer inflation figures are due for release on Tuesday and will be followed by the crucial FOMC monetary policy decision on Thursday. This would play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the major. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out.

Daily Digest Market Movers: Japanese Yen remains on the backfoot amid diminishing odds for a BoJ pivot

• A Reuters report, citing three sources familiar with the matter, said that Bank of Japan Governor Kazuo Ueda’s comments last week were not meant to signal an imminent policy shift.
• This, along with data showing that Japan’s economy contracted more sharply than first estimated in the third quarter, by an annualized 2.9%, is seen undermining the Japanese Yen.
• The US Bureau of Labor Statistics (BLS) reported on Friday that the economy added 199K new jobs in November as compared to the 150K in the previous month and 180K anticipated.
• Additional details of the publication revealed that the Unemployment Rate declined to 3.7% from 3.9% in October, despite a rise in the Labor Force Participation Rate to 62.8% from 62.7%.
• Annual wage inflation, as measured by the change in Average Hourly Earnings, matched consensus estimates and held steady at 4% during the reported month.
• The upbeat US employment figures forced investors to scale back their expectations for an early interest rate cut by the Federal Reserve, as early as March 2024.
• Investors now look forward to the latest US consumer inflation figures on Tuesday, which could influence market expectations about a series of Fed rate cuts next year.
• The US central bank is also scheduled to announce its policy decision at the end of a two-day policy meeting on Wednesday and is anticipated to maintain the status quo.
• The market focus, meanwhile, will be on the so-called “dot plots” and Fed Chair Jerome Powell’s comments at the post-meeting press conference.

Technical Analysis: USD/JPY bulls need to wait for a move beyond the 38.2% Fibo. before placing fresh bets

From a technical perspective, the USD/JPY pair last week showed some resilience at the very important 200-day Simple Moving Average (SMA). The subsequent move beyond the 23.6% Fibonacci retracement level of the recent decline from the 152.00 neighbourhood, or the YTD peak, favours bullish traders. The momentum, however, paused ahead of the 38.2% Fibo. level during the Asian session on Monday, which if cleared should allow spot prices to reclaim the 146.00 mark. The momentum could get extended further, though is more likely to remain capped near the 50% Fibo. level, around the 146.80 region. 

Meanwhile, oscillators on the daily chart are holding deep in the negative territory and support prospects for the emergence of some selling at higher levels. That said, the 145.00 psychological mark might now protect the immediate downside ahead of the 144.55-144.50 area, or the 50% Fibo. level and the 144.00 round figure. Failure to defend the…