USD/JPY Outlook: Japan and US Rate Decision Eyed

  • PM Ishiba noted on Thursday that the government fully supports the Bank of Japan.

  • US private employers hired 146,000 new workers in November. 

  • The US services sector grew less than expected in November.

The USD/JPY outlook indicates a steady yen as markets prepare for a likely rate hike in Japan and a rate cut in the US. However, there was caution on Thursday, a day before the all-important US monthly employment report. 

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The yen has rebounded amid increasing pressure on the Bank of Japan to hike interest rates in recent weeks. Inflation data has supported this outlook, allowing policymakers to shift to a more hawkish tone.

At the same time, Prime Minister Shigeru Ishiba noted on Thursday that the government fully supported the Bank of Japan. Moreover, he said it was time to end the stimulus policies, indicating his support for rate hikes. As a result, market participants are pricing an over 50% likelihood of a rate hike in December. 

Meanwhile, data in the US on Wednesday revealed that private employers hired 146,000 new workers in November. This was a drop from the previous month’s 184,000. However, there was little impact on the dollar as it came near the forecast of 152,000.

Meanwhile, another report showed that the services sector grew less than expected in November, with the services PMI coming in at 52.1. Economists had expected a reading of 55.7. Markets also followed Powell’s speech where he noted that the US economy was more resilient than expected.

As a result, policymakers might prefer to maintain caution in future policy moves. Traders are now looking forward to Friday’s nonfarm payrolls report. According to estimates, the economy added 195,000 jobs in November. Meanwhile, the unemployment rate rose from 4.1% to 4.2%

USD/JPY key events today

USD/JPY technical outlook: Bulls struggling above 150.00

USD/JPY technical outlookUSD/JPY technical outlook
USD/JPY 4-hour chart

On the technical side, the USD/JPY price has stalled after attempting to break above the 30-SMA resistance. Soon after bulls punctured the SMA, the price made a bearish engulfing candle. This signaled a surge in bearish momentum. As a result, bears and bulls are now battling for control near the SMA. 

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Meanwhile, the RSI has made a bullish divergence, signaling a looming reversal. If bulls win, the price might soon retest the 152.00 resistance. On the other hand, if bears win, it will drop to the 149.02 support level. 

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