Japanese Yen adds to its intraday losses after BoJ’s decision to leave rates unchanged

• The Japanese Yen dives to a one-month low after the BoJ’s decision to leave rates unchanged. 
• The Fed’s hawkish shift remains supportive of elevated US bond yields and also weighs the JPY. 
• The risk-off impulse could support the safe-haven JPY and cap the upside for the USD/JPY pair. 

The Japanese Yen (JPY) attracts some follow-through selling during the Asian session on Thursday and drops to a near one-month low against its American counterpart after the Bank of Japan (BoJ) left interest rates unchanged. Apart from this, the Federal Reserve’s (Fed) projected cautious path of easing next year remains supportive of elevated US Treasury bond yields and contributes to driving flows away from the lower-yielding JPY. This, along with the underlying strong USD bullish sentiment, lifts the USD/JPY pair beyond the 155.00 psychological mark in the last hour.

Meanwhile, the global risk sentiment took a turn for the worse in reaction to the Fed’ hawkish interest rate cut on Wednesday. This is evident from a sea of red across the equity markets, which, along with geopolitical risks and concerns about US President-elect Donald  Trump’s tariff plans, could offer some support to the safe-haven JPY. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for the JPY is to the downside. Traders now look to the BoJ Governor  Kazuo Ueda’s comments at the post-meeting press conference for a fresh impetus.

Japanese Yen selling bias remains unabated after BoJ’s policy decision

• The Bank of Japan decided to keep the short-term rate target unchanged in the range of 0.15%-0.25% after the conclusion of a two-day monetary policy review meeting.
• This comes hours after the Federal Reserve lowered its benchmark policy rate by 25 basis points on Wednesday to the 4.25%-4.50% range, marking the third rate cut since September.
• Meanwhile, the Fed’s so-called dot plot indicated that policymakers now see just two quarter-point rate cuts next year compared to four rate cuts forecasted in September. 
• In his post-meeting press conference, Fed Chair Jerome Powell said that inflation remains somewhat elevated relative to the central bank’s 2% longer-run goal. 
• The yield on the benchmark 10-year US government bond recorded its highest closing since May 31 and the US Dollar shot to a two-year high after the Fed’s hawkish cut.
• Elevated US bond yields, along with expectations that the Bank of Japan will keep interest rates unchanged, further drive flows away from the lower-yielding Japanese Yen.  
• Later during the early North American session, the US macro data – the final Q3 GDP print and Weekly Initial Jobless Claims – might provide some impetus. 
• The market attention will then shift to the US inflation data – the US Personal Consumption Expenditures (PCE) Price Index, due for release on Friday. 

USD/JPY seems poised to appreciate further; breakout above 155.00 in play

Against the backdrop of the recent strong move up from 100-day Simple Moving Average (SMA) support, or the monthly low, a subsequent strength beyond the 155.00 psychological mark could be seen as a key trigger for bullish traders. Furthermore, oscillators on the daily chart have been gaining positive traction and are still away from being in the overbought zone. Hence, a sustained strength beyond the said handle should allow the USD/JPY pair to surpass the 155.40-155.45 intermediate hurdle and aim to reclaim the 156.00 mark. The momentum could extend further towards testing the multi-month top, around the 156.75 area touched in November.

On the flip side, the 154.25 area now seems to act as an immediate support ahead of the 154.00 mark. Some follow-through selling might expose the weekly low, around the 153.15 region, which if broken could drag the USD/JPY pair to the next relevant support near the 152.55-152.50 zone. Any further decline could be seen as a buying opportunity and remain limited near the very important 20-day SMA pivotal support near the 152.20 region. Failure to defend the said support levels might shift the near-term bias in favor of bearish traders and make spot prices vulnerable to weaken further towards the 151.00 round-figure mark.