Key Points:
BoJ Stability: The Bank of Japan did not alter its policy, putting upward pressure on the Yen.
US Mixed Bag: Robust job creation and lower GDP growth frustrated the US Dollar.
Inflation Data to Follow: Upcoming US PCE data will drive Fed rate bets.
BoJ Policy Decision and Its Immediate Market Impact
The Japanese Yen managed to gain momentum after a decision by the BoJ to leave its current policy settings unchanged amidst political uncertainty, with Japan's snap election seeing the Liberal Democratic Party lose its majority for the first time in 15 years. Governor Kazuo Ueda revealed in his post-meeting remarks that though the BoJ policy is steady, there is still uncertainty with regard to the Japanese economy and inflation, which may mean potential interest rate hikes this December.
The announcement by the BoJ underpinned the Yen and highlighted its safe-haven status after equity markets performed with a weaker tone. This stability supported the Yen to climb against the USD and kept the USD/JPY pair below the 153.00 level during the European session.
Mixed US Economic Data and Its Impact on Forex Markets
While the BoJ policy decision played the lion's share of influence over currency markets, mixed data out of the US added layers to the narrative. The US Bureau of Economic Analysis reported that the nation's third-quarter GDP growth came in at an annualized rate of 2.8% versus the 3% forecast. On the jobs front, the ADP surprised with a sharp rise in private sector jobs-233,000 new positions added in October versus expectations of 115,000.
This mixed economic picture affected the USD, as any robust rebound was capped and allowed the Japanese Yen to take advantage of these movements. The action will continue to be a heavy hindrance on the Fed's path to future cuts, while the next US PCE Price Index is scheduled as the next driving force for further direction.
USD/JPY Pair: Technical View
From a purely technical perspective, the inability of the recent upside momentum to sustain above the 61.8% Fibonacci retracement of its downtrend from mid-July to late-September could be considered as a cause for caution for the bullish traders. The daily RSI moves near the overbought region, which could suggest at least a corrective pullback.
Should the selling pressure continue, the USD/JPY currency pair may rise to the 152.00 support, followed by 151.45 and 151.00. On the upside, an immediate resistance is eyed at the 153.85-153.90 region, while an upside break could push through the 154.35-154.40 level and reach the psychological 155.00 level.
Market Outlook Ahead of BoJ Policy and US Economic Indicators
Now, attention shifts to the US PCE Price Index release. Since this is the Federal Reserve's favored indicator of inflation, it might hold the key to the future course of monetary policy action. Anything stronger than expected could go on to help the USD rally and might reverse some Yen gains currently seen.
The view expressed by Governor Ueda that foreign exchange rates are exerting a greater influence on prices, in addition to firm wage growth in Japan, leaves the door open for a rate increase in December. These two major focal points, the BoJ policy and US economic data, create a challenging yet informative backdrop against which traders monitor currency movements.
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