- The Japanese yen weakens after weaker domestic wage growth data.
- The prevailing cautious mood in the market does not provide much support for the Japanese yen as a safe haven.
- Weak US Dollar price action limits USD/JPY gains as traders await the US CPI on Thursday.
The Japanese Yen (JPY) continues its downward movement for the second day in a row on Wednesday and weakens further below the psychological level of 145.00 against the US Dollar (USD) during the first part of the European session. Earlier today, the Labor Ministry reported that real wages in Japan contracted for the 20th month in November. This comes on top of lower inflation rates in Tokyo – Japan’s capital – and reaffirms bets that the Bank of Japan (BoJ) will not move away from negative interest rates in January. This in turn is a major factor that continues to undermine the Japanese yen, which has so far failed to attract any refuge flows amid the dovish mood prevailing in stock markets.
On the other hand, the dollar derives some support from the rise in US Treasury yields and remains close to the three-week peak recorded last Friday. This also contributes to the follow-up to the positive movement of the USD/JPY pair, especially after the good bounce the previous day from the vicinity of the technically significant 200-day Simple Moving Average (SMA). However, uncertainty about the path of the Fed’s rate cut is preventing US dollar bulls from placing new bets and limiting the currency pair’s gains. Investors may also prefer to move to the sideline and look forward to the latest US consumer price inflation numbers on Thursday before positioning themselves for the next phase of the directional move.
Market Drivers in Daily Summary: The Japanese Yen adds to losses inspired by weaker local data against the US Dollar
- The Japanese yen continues to decline after the Japanese Labor Ministry announced on Wednesday that inflation-adjusted real wages fell by 3.0% in November compared to the previous year.
- Moreover, nominal wages for Japanese workers rose a modest 0.2% in November – the slowest rate in nearly two years – compared to a 1.5% rise the previous month.
- This comes on top of data on Tuesday, which showed that Tokyo’s core consumer price index (CPI) slowed to a 2.1% year-on-year rate in December and matches the lowest level recorded in June 2022.
- This further dampens hopes of a hawkish turn by the Bank of Japan, which views wage trends and inflation expectations as key factors in considering dismantling its negative interest rate policy.
- The Japanese government is considering doubling budget reserves to 1 trillion yen for the new fiscal year starting in April to cover post-earthquake reconstruction costs, the Asahi newspaper reported.
- Japanese Prime Minister Fumio Kishida’s government agreed earlier Tuesday to spend 4.74 billion yen from fiscal year 2023/24 reserves for aid such as water, food, diapers and heaters.
- The 10-year US government bond yield remains steady above the 4.0% threshold amid lower bets on an early rate cut and supports the US dollar.
- The fundamental backdrop supports prospects for further upward movement in USD/JPY, although bulls may await US consumer inflation numbers on Thursday.
Technical Analysis: USD/JPY looks to build on positive move above 145.00, bulls maintain control
Technically, an overnight bounce from the vicinity of the all-important 200-day Simple Moving Average (SMA) and subsequent upward move validates the positive outlook. Some subsequent buying beyond the 145.00 psychological level will reaffirm the positive outlook and pave the way for additional gains. USD/JPY could then rise to the 146.00 area, or the multi-week high reached last Friday, with some moderate obstacles near the mid-145.00 areas.
On the flip side, the 144.50 area now appears to be protecting the immediate downside ahead of the bottom of the Asian session, around the 144.30 area. The next relevant support is near the 144.00 level, below which USD/JPY could slide again to challenge the 200-day simple moving average, currently near the 143.35 area. A convincing break below the latter would indicate that the recent good recovery from a multi-month low has lost steam and lead to a strong technical sell-off.
Japanese yen price today
The table below shows how much the Japanese Yen (JPY) has changed against the major currencies listed today. The Japanese yen was the strongest against .
| American dollar | euro | GBP | Bastard – scoundrel | Australian dollar | JPY | New Zealand dollar | Swiss franc | |
| American dollar | -0.02% | 0.07% | -0.05% | -0.29% | 0.33% | -0.06% | 0.00% | |
| euro | 0.02% | 0.09% | -0.03% | -0.26% | 0.35% | -0.05% | 0.03% | |
| GBP | -0.08% | -0.09% | -0.12% | -0.36% | 0.26% | -0.14% | -0.06% | |
| Bastard – scoundrel | 0.06% | 0.05% | 0.14% | -0.22% | 0.40% | -0.01% | 0.09% | |
| Australian dollar | 0.28% | 0.26% | 0.35% | 0.23% | 0.61% | 0.21% | 0.28% | |
| JPY | -0.33% | -0.35% | -0.26% | -0.40% | -0.62% | -0.41% | -0.32% | |
| New Zealand dollar | 0.07% | 0.05% | 0.14% | 0.02% | -0.21% | 0.39% | 0.07% | |
| Swiss franc | -0.01% | -0.02% | 0.07% | -0.06% | -0.28% | 0.33% | -0.07% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent the EUR (base)/JPY (quote).
Economic indicator
US Consumer Price Index (annual)
Inflationary or deflationary trends are measured by periodically collecting the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The annual reading compares commodity prices in the reference month with the same month of the previous year. The Consumer Price Index is a key indicator for measuring inflation and changes in purchasing trends. In general, a high reading is considered bullish for the US Dollar (USD), while a low reading is considered bearish.
Read more.
Next release: 01/11/2024 at 13:30:00 GMT
repetition: monthly
source: US Bureau of Labor Statistics
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to this mandate, inflation should be around 2% year-on-year, and it has become the weakest pillar of the central bank’s guidance since the world suffered from the pandemic, which extends to the present day. Price pressures continue to rise amid supply chain issues and bottlenecks, with the Consumer Price Index remaining at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain a strong stance for the foreseeable future.