USD/JPY Rebounds as BoJ Ueda Pledges to Support Economic Activity

Japanese Yen Outlook: USD/JPY

USD/JPY continues to defend the rally following the US election as it attempts to retrace the decline from the monthly high (156.75), and the exchange rate may further retrace the decline from the yearly high (161.95) as Bank of Japan (BoJ) Governor Kazuo Ueda insists that ‘monetary policy will continue to firmly support economic activity.’

USD/JPY Rebounds as BoJ Ueda Pledges to Support Economic Activity

The Japanese Yen is under pressure as BoJ Governor Ueda states that ‘gradually adjusting the degree of accommodation in line with improvement in economic activity and prices will support long-term economic growth and contribute to achieving the price stability target in a sustainable and stable manner’ while speaking in Nagoya.

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Governor Ueda goes onto say that ‘the actual timing of the adjustments will continue to depend on developments in economic activity and prices as well as financial conditions,’ and it seems as though the BoJ has little intentions of pursuing a rate-hike cycle as the central bank pledges to ‘pay due attention to various risk factors, such as those pointed out in the latest Outlook Report, including the course of overseas economies, particularly the U.S. economy, and developments in financial and capital markets.’

In turn, the Japanese Yen may face headwinds over the remainder of the year as the BoJ looks poised to keep interest rates on hold at its last meeting for 2024, and developments coming out of the US may sway USD/JPY over the coming days as Federal Reserve Chairman Jerome Powell warns that ‘the economy is not sending any signals that we need to be in a hurry to lower rates.’

With that said, USD/JPY may track the recent rise in long-term US Treasury yields as it attempts to retrace the decline from monthly high (156.75), but the Relative Strength Index (RSI) may show the bullish momentum abating should it continue to hold below overbought territory.

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Strategist; USD/JPY on TradingView

USD/JPY may retrace the decline from last week as it holds above 153.80 (23.6% Fibonacci retracement), with a breach above 156.50 (78.6% Fibonacci extension) raising the scope for a test of the monthly high (156.75).
A breach above the 1990 high (160.40) opens up the yearly high (161.95) but lack of momentum to hold above 153.80 (23.6% Fibonacci retracement) would bring the 2022 high (151.95) back on the radar.
Failure to defend the monthly low (151.29) may push USD/JPY back towards the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone, with the next area of interest coming in around 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension).

Additional Market Outlooks

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--- Written by David Song, Senior Strategist

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