Yen Strengthens Amid Speculation of BoJ Policy Shift and Business Sector's Currency Concerns

Samantha Luan

Forex

Central Bank

Economic

Summary:

Nikkei report indeed aligns closely with BoJ's existing communication, where a wage-price spiral is considered a prerequisite for any rate hike.

Yen has a notable bounce in Asian session today, fueled by a Nikkei report suggesting that BoJ is finally near to the end its negative interest rate policy. This policy shift, which could see interest rates rise as early as the first half of next year, hinges on the outcomes of spring labor-management negotiations and consumer spending development. Such a move, if realized, would mark a major shift in monetary policy, being the first interest rate hike in 17 years.

Nikkei report indeed aligns closely with BoJ's existing communication, where a wage-price spiral is considered a prerequisite for any rate hike. While BoJ has not specified a timeline, the timing of spring wage negotiations make the first half of 2024 a plausible period for this policy change.

In a related development, Yomiuri newspaper reported that Japan's top business lobby, Keidanren, plans to discuss the potential negative impacts of Yen's weakness on the economy. This is a notable shift, as Keidanren, comprising major companies in the automotive and electronics sectors, has traditionally favored a weak yen. A reevaluation of this stance could intensify calls for BoJ to end ultra-loose monetary policy, reflecting a changing perspective in Japan's business sector regarding currency valuation and economic impact.

Globally, Dollar is underperforming, extending its near-term sell-off. Euro, continuing to struggle too, has failed to break out from its near-term range against the weak Dollar. Swiss Franc is performing marginally better than Euro, while Sterling appears firmer among European currencies. Interestingly, Australian Dollar is currently the second strongest after Yen, showing resilience despite weak retail sales data, followed by Canadian Loonie and New Zealand Kiwi.

From a technical standpoint, EUR/JPY's break of 162.42 minor support indicates the start of the third leg of the corrective pattern from 164.29. Deeper fall could reach 161.22 support and potentially lower, though strong support is expected around 159.75 resistance-turned-support to complete the correction. However, decisive fall through 159.75 would be a significant indicator of Yen's underlying strength.

Yen Strengthens Amid Speculation of BoJ Policy Shift and Business Sector's Currency Concerns_1

In Asia, at the time of writing, Nikkei is down -0.31%. Hong Kong HSI is down -0.60%. China Shanghai SSE is up 0.10%. Singapore Strait Times is down -0.38%. Japan 10-year JGB yield is down -0.0075 at 0.768. Overnight, DOW fell -0.16%. S&P 500 fell -0.20%. NASDAQ fell -0.07%. 10-year yield fell -0.083 to 4.389.

Australia retail sales down -0.2% mom in Oct, strategic delay for Black Friday

Australia's retail sales turnover in October displayed an unexpected downturn, falling by -0.2% mom, contrary to the anticipated rise of 0.1% mom. This decline follows a period of growth, with 0.9% mom increase in September and 0.2% mom rise in August.

Ben Dorber, head of retail statistics at ABS, noted “Retail turnover fell in October after a short-lived boost in spending in September.” This downturn was seen across all retail categories except food retailing.

Dorber attributed this pause in consumer spending to a strategic delay by consumers, who are likely waiting to capitalize on Black Friday sales events in November. He observed that this has become a recurring pattern in recent years, with Black Friday sales gaining increasing popularity among consumers.

RBA's Bullock: we have to be a little bit careful in this period

In a central bank conference held in Hong Kong, RBA Governor Michele Bullock said that monetary policy is currently restrictive, a necessary stance to moderate demand and anchor inflation expectations.

Bullock highlighted the need to be “a little bit careful,” in this period, aiming to control inflation and bring it back within target range of 2-3%, while also being mindful of not overly burdening the economy or causing a significant rise in unemployment rates.

Bullock also pointed out the emergence of “second-round effects” in areas like wages, observing that businesses are currently able to pass on increased costs to maintain profit margins, a trend reflecting sufficient demand.

At the same panel, BoE Deputy Governor Dave Ramsden stated that monetary policy in UK would likely need to remain “restrictive for an extended period” to effectively bring inflation back to 2% target.

Additionally, Pablo Hernández de Cos, Governor of Bank of Spain, noted that tight monetary policy is necessary in the short term. However, he also mentioned the possibility of easing should inflation slow as forecasted.

Looking ahead

Germany Gfk consumer confidence and Eurozone M3 will be release in European session. Later in the day, US will release house price index and consumer confidence.

USD/JPY Daily Outlook

USD/JPY's break of 148.57 minor support indicates rejection by 55 4H EMA. Intraday bias is back on the downside to extend the decline from 151.9. Next target is 147.14 support. Further break of 61.8% projection of 151.89 to 147.14 from 149.66 at 146.72will pave the way to 100% projection at 149.91, which is close to 145.06 key resistance turned support. For now, risk will stay on the downside as long as 149.66 resistance holds, in case of recovery. Yen Strengthens Amid Speculation of BoJ Policy Shift and Business Sector's Currency Concerns_2

Yen Strengthens Amid Speculation of BoJ Policy Shift and Business Sector's Currency Concerns_2

In the bigger picture, rise from 127.20 (2023 low) is seen as the second leg of the pattern from 151.93 (2022 high). Decisive break of 145.06 resistance turned support will confirm that this second leg has completed, after rejection by 151.93. Deeper fall would be seen through 38.2% retracement of 127.20 to 151.89 at 142.45 to 61.8% retracement at 136.63. Nevertheless, strong bounce from 145.06 will retain medium term bullishness for another test on 151.93 at a later stage. Yen Strengthens Amid Speculation of BoJ Policy Shift and Business Sector's Currency Concerns_3

Yen Strengthens Amid Speculation of BoJ Policy Shift and Business Sector's Currency Concerns_3

Source: ActionForex

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DXY

The DXY (U.S. Dollar Index), the overall momentum of the chart is bearish, indicating a downward trend. The price could potentially continue its bearish movement towards the 1st support.

The 1st support at 102.94 is identified as an overlap support, and it also coincides with the 127.20% Fibonacci Extension level. This suggests that it's a significant level where buying interest may emerge, providing support for the U.S. Dollar Index.

The 2nd support at 102.59 is another overlap support level, and it aligns with the 161.80% Fibonacci Extension. This adds further significance to this support level, indicating it as a potential area where buyers might become active.

On the resistance side, The 1st resistance at 103.62 is categorized as a pullback resistance, implying that it's a level where selling pressure may increase, acting as a potential barrier to further upward price movement.

The 2nd resistance at 104.05 is noted as an overlap resistance, which suggests it's another significant level where selling interest could intensify.

EUR/USD

EUR/USD, the overall momentum of the chart is bearish, indicating a downward trend. There is a potential scenario where the price could react bearishly off the 1st resistance and decline towards the 1st support.

The 1st support at 1.0923 is considered an overlap support, suggesting it's a significant level where buying interest may emerge, potentially providing support for the currency pair.

The 2nd support at 1.0879 is also an overlap support level, indicating another potential area where buyers could become active and offer support.

On the resistance side, The 1st resistance at 1.0956 is categorized as a multi-swing high resistance. This level represents a significant barrier to upward price movement.

The 2nd resistance at 1.0997 is noted as a level where selling pressure may intensify, as it aligns with the 127.20% Fibonacci Extension.

EUR/JPY

The analyzed instrument is EUR/JPY, and the overall momentum of the chart is currently bearish.

There is a potential for the price to make a short-term rise towards the 1st resistance before reversing off it and dropping towards the 1st support.

The 1st support level is identified at 162.36, and its favorable characteristic is attributed to being a pullback support.

The 2nd support level is situated at 161.54, and its favorable aspect is derived from being a swing low support.

On the resistance side, the 1st resistance is positioned at 162.89, and it is considered significant due to being an overlap resistance.

The 2nd resistance is located at 163.65, and its significance is derived from being a swing high resistance.

EUR/GBP

The analyzed instrument is EUR/GBP, and the overall momentum of the chart is currently bearish.

There is a potential for the price to make a bearish continuation towards the 1st support.

The 1st support level is identified at 0.8663, and its favorable characteristic is attributed to being a multi-swing low support.

The 2nd support level is situated at 0.8641, and its favorable aspect is derived from being a swing low support and coinciding with the 161.80% Fibonacci Extension.

On the resistance side, the 1st resistance is positioned at 0.8689, and it is considered significant due to being an overlap resistance.

The 2nd resistance is located at 0.8720, and its significance is derived from being a swing high resistance.

GBP/USD

The GBP/USD, the overall momentum of the chart is bearish, indicating a downward trend. There's a potential scenario where the price could react bearishly off the 1st resistance and drop towards the 1st support.

The 1st support at 1.2558 is considered a pullback support, suggesting it's a level where buying interest may emerge and provide support for the currency pair.

The 2nd support at 1.2497 is also an overlap support level, indicating another potential area where buyers could become active and offer support.

On the resistance side, the 1st resistance at 1.2633 is categorized as an overlap resistance. This level is significant as it aligns with the 100% Fibonacci Projection, which adds further significance to the resistance level.

The 2nd resistance at 1.2712 is noted as a swing high resistance, which suggests it's a point where selling pressure may increase.

GBP/JPY

The overall momentum of GBP/JPY is bearish,indicating a downward trend.The price could potentially react bearishly off the 1st resistance level and drop towards the 1st support.

The 1st support at 187.01 is considered a pullback support, and it coincides with the 61.80% Fibonacci retracement level. This convergence of technical factors makes it a significant level where buying interest may emerge, potentially providing support for the currency pair.

The 2nd support at 185.95 is characterized as a multi-swing low support, indicating another area where buyers might become active.

The 1st resistance at 188.17 is identified as a pullback resistance, suggesting a level where selling pressure could intensify and act as a barrier to further upward price movement.

USD/CHF

USD/CHF, the overall momentum of the chart is bullish, indicating an upward trend. There's a potential scenario where the price could make a bullish bounce off the 1st support and head towards the 1st resistance.

The 1st support at 0.8796 is considered an overlap support, suggesting that it's a level where buying interest may emerge and provide support for the currency pair.

The 2nd support at 0.8769 is a swing low support, indicating another level where buyers could potentially become active and offer support.

On the resistance side, the 1st resistance at 0.8826 is categorized as an overlap resistance, suggesting that it's a level where selling pressure may intensify and act as a potential barrier to further upward price movement.

The 2nd resistance at 0.8854 is also an overlap resistance, reinforcing the potential resistance at this level.

USD/JPY

The USD/JPY, the overall momentum of the chart is bearish, indicating a downward trend. There's a potential scenario where the price could continue its bearish movement towards the 1st support.

The 1st support at 147.51 is considered a multi-swing low support, suggesting that it's a significant level where buying interest may emerge and provide support for the currency pair.

The 2nd support at 146.16 is a swing low support, and it also coincides with the 78.60% Fibonacci Projection, making it a strong potential support level.

On the resistance side, the 1st resistance at 149.63 is categorized as a multi-swing high resistance, indicating a level where selling pressure may intensify and act as a barrier to further upward price movement.

The 2nd resistance at 150.34 is a pullback resistance, suggesting another potential point where sellers could enter the market.

There's also an intermediate resistance at 148.36, which is another level to watch for potential pullback resistance.

USD/CAD

The USD/CAD, the overall momentum of the chart is currently bullish, suggesting a potential upward movement in price. In this scenario, there is a possibility that the price could experience a bullish bounce off the 1st support level and head towards the 1st resistance.

Here are the key levels and reasons for their significance

1st support at 1.3604 This level is identified as an overlap support, indicating it has previously acted as a price point where buyers have shown interest and provided support.

2nd support at 1.3578 The 2nd support level is another critical level, as it aligns with the 127.20% Fibonacci Extension, making it a potential zone where buyers might become active.

On the resistance side, the 1st resistance at 1.3653 The 1st resistance is characterized as an overlap resistance, suggesting a level where selling pressure may intensify.

2nd resistance at 1.3693 The 2nd resistance is identified as a pullback resistance, indicating a point where sellers may enter the market.

AUD/USD

AUD/USD, the overall momentum of the chart is currently bearish, suggesting a potential downward movement in price. In this scenario, there is a possibility that the price could react bearishly off the 1st resistance and drop towards the 1st support.

Here are the key levels and reasons for their significance

1st support at 0.6570 This level is identified as an overlap support, indicating it has previously acted as a price point where buyers have shown interest and provided support.

2nd support at 0.6520 Similar to the 1st support, this is also an overlap support, reinforcing its significance as a potential area where buyers might step in.

On the resistance side, the 1st resistance at 0.6641 The 1st resistance is characterized as a pullback resistance, and it also aligns with the 161.80% Fibonacci Extension level. This confluence suggests a strong resistance zone where selling pressure may intensify.

2nd resistance at 0.6724 The 2nd resistance is another overlap resistance level, further adding to its potential as a strong resistance point.

NZD/USD

NZD/USD, the overall momentum of the chart is currently bearish, indicating a potential downward movement in the price. In this scenario, there is a possibility that the price could react bearishly off the 1st resistance and drop towards the 1st support.

Here are the key levels and reasons for their significance

1st support at 0.6065 This level is identified as an overlap support, suggesting that it's a price point where buyers have previously shown interest and may provide support again.

2nd support at 0.6011 This level is also an overlap support, reinforcing its significance as a potential area where buyers might step in.

On the resistance side, 1st resistance at 0.6105 The 1st resistance is characterized as a swing high resistance. This level is important because it has confluence with both the 78.60% Fibonacci Projection and the 127.20% Fibonacci Extension, indicating a strong resistance zone.

2nd resistance at 0.6140 The 2nd resistance level is associated with the 161.80% Fibonacci Extension, adding further weight to its potential as a strong resistance point.

DJ30

The DJ30, the momentum of the chart is bearish, indicating a downward trend. The price could potentially continue its bearish movement towards the 1st support level.

The 1st support at 35075.70 is identified as an overlap support, which implies that it's a significant level where buying interest may emerge, providing support for the DJ30 index.

The 2nd support at 34768.62 is categorized as a pullback support, suggesting that it's a level where buyers might be more inclined to step in.

Intermediate resistance at 35409.48 is noted as a pullback resistance, signifying a level where selling pressure could mount, acting as a potential obstacle to further upward price movement.

The 2nd resistance at 35721.09 is categorized as a multi-swing high resistance, indicating that it's a point where sellers might engage in the market.

GER40

The GER40 overall momentum is overall bearish, indicating a downward trend. The price could potentially continue its bearish movement towards the 1st support level.

The 1st support at 15872.3 is identified as an overlap support, suggesting that it's a significant level where buying interest may emerge and provide support for the GER40 index.

The 2nd support at 15803.8 is also categorized as an overlap support level, indicating another potential area where buyers could become active.

The 1st resistance at 15991.2 is noted as a pullback resistance, signifying a level where selling pressure could intensify, serving as a potential barrier to further upward price movement.

The 2nd resistance at 16064.4 is categorized as a swing high resistance, suggesting that it's a point where sellers may engage in the market.

US500

The overall momentum of US500 is bullish. The price could potentially continue its bullish movement towards the 1st resistance level.

The 1st support at 4529.6 is identified as an overlap support, suggesting that it's a significant level where buying interest may provide support for the S&P 500 index.

The 2nd support at 4461.2 is categorized as a pullback support level, indicating another area where buyers could become active after a retracement.

The 1st resistance at 4598.0 is noted as a pullback resistance, signifying a level where selling pressure may intensify and act as a potential barrier to further upward price movement.

The 2nd resistance at 4633.1 is also categorized as a pullback resistance, suggesting that it's a point where sellers may become more active.

BTC/USD

The analyzed instrument is BTC/USD, and the overall momentum of the chart is currently bearish.

There is a potential for the price to make a bearish continuation towards the 1st support.

The 1st support level is identified at 35717, and its favorable characteristic is attributed to being a multi-swing low support.

An intermediate support is also noted at 36754, and its significance is derived from being a swing low support.

On the resistance side, the 1st resistance is positioned at 38313, and it is considered significant due to being a swing high resistance.

The 2nd resistance is located at 39878, and its significance is derived from being a swing high resistance.

ETH/USD

The analyzed instrument is ETH/USD, and the overall momentum of the chart is currently bearish.

There is a potential for the price to make a bearish reaction off the 1st resistance and drop to the 1st support.

The 1st support level is identified at 1985.49, and its favorable characteristic is attributed to being a swing low support.

The 2nd support level is situated at 1931.71, and its favorable aspect is derived from being a multi-swing low support.

On the resistance side, the 1st resistance is positioned at 2040.19, and it is considered significant due to being an overlap resistance.

The 2nd resistance is located at 2129.57, and its significance is derived from being a multi-swing high resistance.

WTI/USD

The WTI (West Texas Intermediate) crude oil, the overall momentum of the chart is currently neutral, suggesting a lack of a clear bullish or bearish trend. In this situation, there is a potential scenario where the price could fluctuate between the 1st resistance and 1st support levels.

The 1st support at 72.57 is identified as an overlap support, implying that it's a level where buyers may show interest and provide support for the price.

The 2nd support at 70.65 is associated with the 127.20% Fibonacci Extension, which adds to its significance as a potential support level.

On the resistance side, the 1st resistance at 78.54 is categorized as a swing high resistance. This level could attract selling interest and act as a barrier to further upward price movement.

The 2nd resistance at 80.32 is considered a pullback resistance.

In addition, a symmetrical triangle chart pattern. Symmetrical triangles are indeed consolidation patterns that indicate a period of indecision in the market. A break above the upper trendline of the symmetrical triangle could signal a bullish breakout. Conversely, a break below the lower trendline might indicate a bearish breakdown. Technical Outlook and Review_17

XAU/USD (GOLD)

The XAU/USD, the overall momentum of the chart is currently neutral, indicating a lack of a clear bullish or bearish trend. In this situation, there is a potential scenario where the price could fluctuate between the 1st resistance and 1st support levels.

The 1st support at 2006.36 is identified as an overlap support, implying that it's a level where buyers may show interest and provide support for the price.

The 2nd support at 1991.79 is also an overlap support level, suggesting another area where buyers might become active.

On the resistance side, the 1st resistance at 2020.35 is categorized as a multi-swing high resistance. This level is significant as it could attract selling interest and act as a barrier to further upward price movement. Additionally, it coincides with the 161.80% Fibonacci Extension, adding to its significance.

The 2nd resistance at 2037.38 is another multi-swing high resistance level. Technical Outlook and Review_18

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