Japanese Yen to USD: Yen drops to fresh multi-month low against USD

The Japanese Yen drops, driven by ongoing uncertainty surrounding potential rate hikes by the Bank of Japan. Japanese Yen to USD: the strength of the US Dollar fuels the rise of the USD/JPY pair, pushing it to a multi-month high. Despite speculation about possible intervention by Japanese authorities, the bears in the Yen market remain unfazed.

The Bank of Japan's preliminary report released this Wednesday revealed that Japan's Producer Price Index (PPI) rose by 3.4% in October compared to the same time period last year and increased by 0.2% on a monthly basis. The yen weakened beyond 155 per dollar for the first time since July, raising the risk that Japan will enter the currency market to try to slow the depreciation.

Japanese Yen Weakens for Fourth Session

The Japanese Yen (JPY) remains under pressure against the US Dollar for a fourth consecutive session, sliding to its lowest level since July 24 during Thursday's Asian trading hours. Despite Japan's Producer Price Index (PPI) recording its fastest annual rise in over a year in October, market sentiment remains skeptical about the Bank of Japan's (BoJ) ability to raise interest rates, given ongoing domestic political uncertainty. Additionally, concerns about the potential impact of high tariffs under US President-elect Donald Trump continue to weigh on the JPY, particularly regarding the Japanese economy.

Meanwhile, expectations that Trump’s expansionary policies could drive inflation keep US Treasury yields elevated near multi-month highs, further disadvantaging the low-yielding JPY. The continuation of the "Trump trade" also pushes the US Dollar (USD) to its highest level since November 2023, providing additional support for the USD/JPY pair. However, fears of potential intervention by Japanese authorities could limit further JPY losses. Additionally, expectations for a 25-basis-point rate cut by the Federal Reserve (Fed) in December, reinforced by the recent US inflation data, could act as a cap for the pair’s upside.

USD/JPY could climb further

From a technical standpoint, the recent breakout above the 61.8% Fibonacci retracement level of the July-September decline, coupled with a close above the key 155.00 psychological level on Wednesday, signals strength for bullish traders. Additionally, oscillators on the daily chart remain firmly in positive territory, well clear of overbought conditions, suggesting the path of least resistance for the USD/JPY pair is still to the upside. As such, follow-through strength above 156.00 is likely, with the next significant resistance zone near 156.55-156.60, and potential for further gains toward the 157.00 round figure and the 157.30-157.35 supply area.

On the downside, the low from the Asian session around 155.30-155.35 is likely to offer near-term support, with 155.00 providing the next key level. A sustained move below this level could trigger technical selling, pushing USD/JPY towards intermediate support at 154.55-154.50, followed by the 154.00 round figure and 153.80. A break below 153.45 could shift the near-term bias in favor of bearish traders.

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