Japanese yen rises slightly, snapping a three-day losing trend versus the US dollar.

On Tuesday, the Japanese Yen (JPY) fell across the board as the Bank of Japan (BoJ) chose to maintain the status quo. And continue its ultra-loose monetary policy settings. The central bank also announced no revisions to its dovish policy guidelines. Disappointing those investors hoping for wording signaling a move away from negative interest rates in the short term. This, in addition to the current risk-on rally Global equities market volatility weighed heavily on the safe-haven JPY. Pushing the USDJPY pair to a four-day high.

The powerful intraday upward advance, however, peaked just ahead of the 145.00 psychological level, as new selling emerged around the US Dollar (USD). The Federal Reserve (Fed) took a dovish turn last week, projecting three 25 basis point (bps) rate cuts in 2024, further undermining the Greenback. Meanwhile, a bevy of powerful Fed officials recently rejected rumors of an impending shift in the US central bank’s policy stance, which did little to excite USD bulls.

The dovish position of the Bank of Japan, combined with the risk-on atmosphere, could damage the JPY.

USDJPY pair lost nearly 100 pips intraday and is expected to remain on the defensive throughout the Asian session. , putting an end to a three-day victory streak. The reduction appears to be unaffected by Japan’s trade data, which revealed that both exports and imports fell more than expected in November. Nonetheless, the BoJ-Fed policy divergence may continue to exert pressure on the JPY, limiting losses for the major. Traders are now looking for a boost from the Conference Board’s US Consumer Confidence Index.

Bets on the Fed cutting rates early weigh on the USD and act as a headwind for USDJPY.

On Friday, the spotlight will be on the release of the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge. The key US inflation figure will be scrutinized for new signals regarding the Fed’s future policy actions, which will fuel USD demand and provide a new directional push to the USDJPY pair. Meanwhile, the previously indicated favorable fundamental backdrop may continue to operate as a tailwind for spot prices, limiting any corrective fall.

Japanese yen Technical Outlook

USDJPY extends the overnight decline from 145.00, or a multi-day high.

Technically, the post-BoJ bounce is stalling near the 38.2% Fibonacci. Retracement level of the November December drop from the 152.00 area. The mentioned obstacle is located near 145.00. And it should now act as an immediate strong resistance and pivotal point. A persistent rise above will indicate that the USDJPY pair has formed a near term bottom. Paving the stage for a substantial appreciating move. The accompanying rally has the ability to push spot prices to the next key level near the mid-145.00s. Around the 146.40 range, to the 146.00 round figure and the 50% Fibo. level.

On the other hand, weakening below the 143.55-143.50 zone. Which represents the 23.6% Fibo. level, may find some support at the 143.00 round figure. This is followed by a theoretically crucial 200-day Simple Moving Average. Which is currently positioned in the 142.65 zone and, if strongly broken. Will move the bias back in favor of bearish traders. The USDJPY pair may then become vulnerable. Falling below the 142.00 level and accelerating its decline to the 141.75 horizontal support before attempting to revisit sub-141.00 levels. Or a multi-month low reached last week.