The Japanese Yen (JPY) fell on January 17 after hitting a nearly one-month high against the US dollar, according to FXStreet. However, the decline was not too strong as the market still expects the Bank of Japan (BoJ) to continue raising interest rates next week. Recent statements by BoJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino have further strengthened the belief in the possibility of an interest rate hike.
In addition, the Yen is also supported by risk aversion and concerns about US President-elect Donald Trump's tax policies, helping the currency maintain its role as a safe haven asset.
This week, some important data from Japan was released. Japanese producer prices rose for the 46th consecutive month, reaching 3.8% year-on-year. However, real wages and household spending fell for the fourth consecutive month, indicating that inflationary pressures are still building. This increases the likelihood that the BoJ will raise interest rates by 0.25% at its January 23-24 meeting. Currently, the market is pricing this probability at around 79%.
Meanwhile, in the US, inflation is showing signs of slowing down, as shown by the recently released producer price index (PPI) and consumer price index (CPI). This has led to speculation that the US Federal Reserve (Fed) may consider cutting interest rates by the end of 2025.
From a technical perspective, if the USD/JPY pair breaks the important support level of 155.00, it could continue to decline to the 154.60-154.55 zone. This is a strong support level, and if broken, the price is likely to fall further to 154.00 or the 153.35-153.30 zone.
Conversely, if USD/JPY is bullish, the main resistance levels are at 156.00, followed by the 156.30-156.35 and 156.65-156.70 zones. A break above these levels could see the pair aiming for 157.00, and in a more optimistic scenario, a multi-month high at 158.85.
Although the Japanese Yen is under pressure from the USD, expectations of a rate hike from the BoJ and a slowdown in inflation in the US will continue to support the currency in the near term. Economic factors and interest rate policies from both Japan and the US will determine the next direction of the USD/JPY pair.
According to Lao Dong, updated at 11:00 a.m. on January 17, the USD/JPY exchange rate is currently fluctuating around 155.387 USD/JPY, meaning 1 USD can be exchanged for about 155 JPY.
