Japanese Yen falls on dismal Household Spending figures; hawkish BoJ caps losses

• Weak Japanese data weighs on the JPY, giving USD/JPY some upward momentum.
• Renewed USD demand, driven by geopolitical uncertainty and Fed rate-rise expectations, provides support.
• Hawkish BoJ expectations restrain JPY losses, with traders awaiting fresh direction from US CPI.

USD/JPY is back above 158.00. Buying on dips during Tuesday's Asian session helps the pair recover some of the previous day's decline. However, spot prices are still trading within the range established in early October, suggesting caution over aggressive directional positions.

A 6.8% year-on-year fall in Japan's Household Spending in September weighs on the Japanese Yen (JPY). The Internal Affairs Ministry's figures show a 10th consecutive monthly decline, the steepest since September 2020. The weak domestic release complicates the Bank of Japan's (BoJ) plans to raise interest rates further. A modest advance in the US Dollar (USD) also lends support to USD/JPY.

Geopolitical risk continues to underpin the USD's safe-haven appeal despite US President Donald Trump's assertion that the conflict is effectively over. Trump said there was positive momentum towards ending the war on Iran and that renewed strikes were quite unlikely. By contrast, Mohsen Rezaei, Secretary of Iran’s Supreme National Security Council, rejected reports of active negotiations as fake news. He restated that Washington must accept Tehran's seven conditions for ending the conflict, keeping the geopolitical risk premium in place.

An over 80% probability of another US Federal Reserve (Fed) rate rise in December remains priced in by traders, according to the CME Group's FedWatch Tool. That provides further backing for the US currency. Attention now turns to the latest US consumer inflation data for guidance on the Fed's policy trajectory and a fresh catalyst. Meanwhile, expectations of a hawkish BoJ and the risk of intervention could contain JPY losses, limiting USD/JPY's upside.

With underlying inflation reaching the central bank's 2% target, some BoJ policymakers advocated a faster pace of interest rate increases, according to the Summary of Opinions from its October monetary policy meeting. Against that backdrop, aggressive bullish positions in USD/JPY warrant waiting for follow-through buying and a sustained move above the mid-158.00s. Conversely, a decline below the 157.50 area would be needed to strengthen the case for further losses.

USD/JPY daily price chart

159.02 Caps USD/JPY: Technical Outlook

At 159.02, the 100-day Simple Moving Average (SMA) continues to cap USD/JPY and represents the first significant resistance. A decisive break above it is needed to reduce the prevailing bearish bias and pave the way for a more durable recovery. Until then, range-bound spot prices suggest that advances remain exposed to selling pressure. The broader structure retains a corrective character while the pair trades below this barrier.

(The technical analysis of this story was written with the help of an AI tool. Know more.)