Forex market news: Japanese Yen Sharply Declines Against USD

Forex market news, the Japanese Yen (JPY) is slipping against the US Dollar as a crucial week begins, partially reversing Friday's significant rise to its highest point since October 21.

US Treasury bond yields are gaining positive momentum in response to President-elect Donald Trump's proposed 100% tariffs on BRICS nations. This development boosts demand for the US Dollar (USD) and is a significant factor driving investment away from the lower-yielding Japanese Yen (JPY).

Additionally, a bullish sentiment in equity markets further diminishes the appeal of the safe-haven JPY. However, ongoing geopolitical tensions and increasing speculation about another interest rate cut by the Bank of Japan (BoJ) in December may help prevent deeper losses for the Yen. Traders are likely to adopt a cautious approach, choosing to wait for key US economic data releases this week, beginning with the ISM Manufacturing PMI later today.

USD/JPY might struggle to capitalize on the positive move

From a technical standpoint, any further upward movement is likely to face significant resistance around the 151.00 level, given the negative oscillators on the daily chart. However, if the USD/JPY pair manages to maintain strength beyond this point, it could spark a short-covering rally, pushing the pair towards the 151.65 intermediate resistance before reaching the critical 152.00 level. This latter point is significant as it coincides with the 200-day Simple Moving Average (SMA), serving as a key pivot. Continued buying momentum would indicate that the recent corrective pullback from a multi-month high has concluded, shifting the near-term outlook back to favor bullish traders.

Conversely, the psychological level of 150.00 appears to act as a barrier against immediate downside movement, just above Friday's swing low around the 149.45 area. If selling pressure continues, it could push the USD/JPY pair further down towards the 149.00 round figure, approaching the next key support levels of 147.60-147.55 and the 148.00 mark, which represents the 50% retracement level of the September-November rally.

Japanese Yen attracts fresh sellers as rising US bond yields revive USD demand

US President-elect Donald Trump has threatened to impose a 100% tariff on the so-called 'BRICS' nations—Brazil, Russia, India, China, and South Africa—if they substitute the US Dollar with another currency for international transactions. This announcement follows Trump's commitment to implement substantial tariffs on America's three largest trading partners: Mexico, Canada, and China, heightening market anxieties about a potential resurgence of a global trade war.

Investors now appear convinced that Trump's tariff plans and expansionary policies could lead to higher consumer prices, potentially prompting the Federal Reserve to halt interest rate cuts or even raise rates again. The anticipation of a less dovish Fed has sparked a new rise in US bond yields, helping the USD recover from a near three-week low and driving investment away from the lower-yielding Japanese Yen.

Additionally, stronger consumer inflation data from Tokyo indicates that underlying inflation is gaining traction, reinforcing the case for another rate hike by the Bank of Japan (BoJ) in December. BoJ Governor Kazuo Ueda stated on Saturday that the next interest rate hikes are approaching, as economic data is progressing well, though he wants to assess the momentum generated by the fiscal 2025 Shunto negotiations.

Japan's Ministry of Finance announced on Monday that capital spending increased by 8.1% year-on-year in the third quarter, indicating that robust domestic demand is supporting the fragile economic recovery.

In other news, Russian and Syrian jets have conducted a series of airstrikes against Syrian rebels, specifically targeting the jihadi group Hayat Tahrir al-Sham, which recently seized control of much of Aleppo during a surprise offensive on Saturday and has also entered the city of Hama.

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