Yen Surges on BoJ Hawkish Expectations

Fundamental Analysis

* Hawkish Expectations from the BoJ? The Japanese Yen has strengthened to a three-week high against both the U.S. Dollar and Pound Sterling as markets anticipate tighter monetary policy from the Bank of Japan (BoJ). Prime Minister Shigeru Ishiba’s push for significant wage increases during the upcoming “Shuntō” negotiations has heightened inflationary concerns, adding pressure on the BoJ to consider further interest rate hikes. Investors are now turning their focus to Tokyo’s Core CPI report, due on Friday, for more insights into Japan’s economic outlook and the central bank’s potential next moves.

Technical Analysis

* Technical Breakout: USD/JPY has displayed signs of a potential bearish continuation after breaking below the strong support level at 151.60. Although the pair experienced a short-term rebound, it subsequently retested the previous support level, now acting as resistance. This retest aligns with a bearish structure, suggesting increased likelihood of further downside movement. The setup offers a favorable risk-reward ratio, reinforcing the potential for extended losses in the pair.

* Resistance and Support: If bearish momentum continues, USD/JPY is likely to extend its losses toward the next support level at 149.30. Conversely, a potential reversal may occur if the pair breaks above the 151.60 resistance level, indicating a shift in momentum back toward the upside.

Potential Risks

With the Thanksgiving holiday approaching, market volume may thin, making prices more susceptible to sharp movements due to buying or selling from global investors. Uncertainty surrounding the Bank of Japan’s monetary policy details could also add to market volatility, affecting the pair’s direction.

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Monitoring

Keep a close eye on U.S. economic data, updates from the Bank of Japan, and Tokyo’s Core CPI report for cues on future USD/JPY movements by following PU Xtrader’s financial news page.

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