Yen Strengthens on Rate Hike Expectations; Euro Tests Recent Lows

FXOpen -

USD/JPY

Over the past week, the USD/JPY pair dropped by approximately 500 pips. As anticipated, sellers tested the critical 150.00–149.00 range. This level may serve as the starting point for an upward corrective rebound.

The sharp decline in USD/JPY is likely tied to recent comments from the Bank of Japan’s Governor, Kazuo Ueda, hinting at a potential rate hike soon. He noted that "economic data is progressing as planned." Following Tokyo's inflation data showing an uptick and increased business investments, experts now predict the BoJ may raise rates by 0.5% at its December meeting.

Technical analysis suggests USD/JPY may begin an upward correction after its sharp fall, as a reversal "doji" candlestick pattern has formed on the daily timeframe.

If the 149.00–148.60 range holds as support, the pair could strengthen towards 151.50–151.00. However, a break below yesterday’s low may resume the downtrend towards 147.00–146.00.

Key upcoming events for USD/JPY in the next trading sessions include:

  • 16:15 (GMT +3): ADP Non-Farm Employment Change (US)
  • 17:45 (GMT +3): US Services PMI
  • 18:00 (GMT +3): ISM Non-Manufacturing PMI (US)

EUR/USD

The euro remains under pressure. In addition to the threat of US-imposed trade tariffs, concerns over the French government have emerged. A political crisis could result in the government’s resignation, exerting further downward pressure on EUR/USD.

Currently trading near 1.0500, the pair may see an upward correction towards 1.0700–1.0600 if buyers manage to push it above the 1.0600–1.0540 zone. However, another rejection at 1.0540 could lead to fresh lows around 1.0340.