Despite Tokyo consumer inflation data surpassing forecasts, providing the Bank of Japan (BOJ) with rationale for further monetary tightening, the Japanese yen (JPY) continues to struggle in attracting substantial speculative interest. Asahi Noguchi emphasized in his speech that, although yen depreciation historically benefited export competitiveness, the approach of full employment and diminishing output gap are diminishing the stimulative effects of currency depreciation, while the negative repercussions are increasingly evident. He asserts that raising interest rates can help curb inflation without hindering the government's economic growth objectives. The BOJ has previously concluded its decade-long accommodative policy and paused rate hikes after raising the policy rate to 0.5% earlier this year to assess the impact of U.S. tariffs. Asahi Noguchi indicated that as long as economic and inflation trends align with the central bank's expectations, a gradual normalization of interest rates remains appropriate. The cautious signals conveyed by the BOJ policymakers suggest that interest rate normalization will be an incremental process, prompting investors to reassess expectations for future policy steps. Furthermore, buoyed by expectations of U.S. interest rate cuts and prospects of a peace agreement between Russia and Ukraine, market risk sentiment remains robust, exerting downward pressure on the yen's safe-haven status. Simultaneously, concerns persist among investors regarding Japan's substantial fiscal stimulus measures potentially worsening its fiscal position, which has led to a recent spike in Japanese government bond yields—another factor contributing to yen depreciation. Conversely, the U.S. dollar is expected to sustain its overnight rebound, providing additional support to the USDJPY exchange rate. However, market expectations of the Federal Reserve adopting a dovish stance are likely to exert downside pressure on the dollar and potentially restrain the USDJPY pair's appreciation.

Market expectations for interest rate cuts were bolstered by dovish comments from Federal Reserve officials. San Francisco Fed President Mary Daly earlier this week expressed support for a December rate reduction, citing softening labor market conditions. Fed Board Member Christopher Waller indicated that, given the ongoing employment weakness, a further 25 basis point cut could be justified in December; however, this decision remains contingent on the release of pending economic data delayed by the U.S. government shutdown. According to the CME FedWatch tool, the implied probability of a 25 basis point rate cut at the December Federal Open Market Committee meeting has surged to 87% from 39% the previous week.

In the 1D timeframe, the Bollinger Bands are expanding upward with the SMA diverging upward, indicating a persistent bullish trend. The price has once again approached the EMA12, while the MACD suggests diminishing upward momentum. The RSI is at 61, reflecting strong bullish market sentiment. As long as the price sustains above the EMA12, upward pressure is likely to push towards the upper Bollinger Band and key psychological levels at approximately 157.7 and 160. In the 4H timeframe, the Bollinger Bands are narrowing, with SMAs leveling off, and the MACD is nearing a golden cross, with its MACD line and signal line approaching the zero-axis, signaling potential trend reversal. The RSI stands at 50, indicating a market in a wait-and-see state. If the price remains below the middle Bollinger Band, a correction towards the 154 level near the EMA200 is probable; conversely, if the price stays above the middle Bollinger Band, further gains toward approximately 158 are anticipated. It is recommended to go long at the lows in the short term.

Trading Direction: Buy

Entry Price: 156.3

Target Price: 158.8

Stop Loss: 154

Support: 154.7, 153.2, 150

Resistance: 157, 158.8, 160