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- USD/JPY sees late rally, jumps to 142.60.
- The US Dollar is paring back the day’s losses as the Yen declines.
- US inflation continues to erode faster than expected.
The USD/JPY is rallying into new highs on Friday as the US Dollar (USD) tries to pare back some of the day’s losses coupled with a broad-market weakening of the Japanese Yen (USD) as markets get set to wrap up the last day of trading before the holiday break and the last full trading week of 2023.
Japanese inflation continues to fall back towards the Bank of Japan’s (BoJ) 2% target, but the BoJ continues to undercut market hopes for a hawkish pivot from the Japanese central bank.
The BoJ remains unconvinced that Japanese inflation will continue to hold above 2% looking forward, and the BoJ remains firmly entrenched in hyper easy monetary policy with negative interest rates.
The US Dollar declined once more on Friday after the US Personal Consumption Expenditures (PCE) Price Index declined faster than expected, seeing a resurgence in rate cut expectations from the markets. The Greenback is now paring back the day’s losses heading into the back half of the week’s final trading session.
Declining US inflation has weighed on the US Dollar this week, igniting a resurgence in investor expectations of an increased pace of rate cuts in 2024.
USD/JPY Technical Outlook
The USD/JPY set a new high for Friday at 142.66, stopping just short of the 50-hour Simple Moving Average (SMA) as the pair gets hung up on near-term resistance levels.
Despite USD/JPY’s Friday rebound, the pair remains firmly bearish, with an unavoidable lower-highs pattern baked into the charts.
The pair remains constrained at the 200-day SMA rising into the 143.00 handle, and the USD/JPY is down over six percent from November’s peak bids near 151.90.