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20.12.202400:28 विदेशी मुद्रा विश्लेषण और समीक्षा: USD/JPY: The Perfect Storm

Relevance up to 12:00 UTC--5

On Wednesday, the pair also demonstrated an upward trend, but traders were reacting to the Federal Reserve's December meeting results. It can be said that the USD/JPY is experiencing a perfect storm, where the Federal Reserve has become an ally of the U.S. dollar, and the Japanese central bank has pressured the yen. Over two days, the pair has surged by over 800 pips, with Wednesday's low recorded at 149.71 and Thursday's high at 157.81—a remarkable move.

Exchange Rates 20.12.2024 analysis

The Federal Reserve surprised markets with a "moderately hawkish" tone. On the one hand, it reduced the interest rate by 25 basis points and declared further steps toward policy easing. On the other hand, the central bank sharply revised its forecasts for 2025. According to the updated dot plot, most FOMC members (15 out of 19) anticipate only a 50-basis-point rate cut next year, compared to the 100-basis-point cut forecasted at the previous September meeting.

Amid the Fed's hawkish pivot, the U.S. Dollar Index hit a two-year high, crossing the 108 threshold for the first time since November 2022.

In contrast, the Bank of Japan adopted a cautious tone, adding pressure to the yen. The BOJ maintained its monetary policy parameters, delivering the most anticipated outcome. Contrary to many analysts' forecasts, BOJ Governor Kazuo Ueda did not announce plans for a rate hike at upcoming meetings.

According to Ueda, the BOJ requires more information before taking additional steps to raise interest rates. He cited two fundamental factors: uncertainty regarding wage growth in Japan and the upcoming Trump presidency in the United States.

The focus on wage trends is not new. Earlier in December, Ueda highlighted that wage dynamics are a "key factor for further steps toward monetary policy normalization." Japanese Prime Minister Shigeru Ishiba has also called for significant wage increases during the upcoming "Shunto" (spring labor negotiations), of which the results will be revealed in March–April 2025. However, some experts doubt the success of these negotiations, as 40% of companies reported declining profits in the first half of the current fiscal year, and 10% reported losses.

While the "Shunto" results are expected in spring, there is a fairly specific time frame here; the "Trump factor" is less defined. According to Ueda, the BOJ needs time to understand how Trump's policies will impact the global and Japanese economies. There are no clear timelines or criteria for this evaluation.

As a result, the prospect of additional rate hikes has been deferred, at least until spring. Many experts had expected a hike either this month or next. According to a December Reuters poll, 56% of economists believed the BOJ would raise rates at the December meeting, and 90% anticipated a hike to 0.50% by April 2025. The median forecast for the BOJ's terminal rate stood at 1.00%.

Analysts cited rising inflation as the primary justification for rate hikes. The Tokyo Consumer Price Index (CPI) had been declining for two consecutive months, reaching 1.8%, but it accelerated to 2.6% in November (versus a forecast of 2.2%). The core CPI, excluding fresh food prices, exceeded expectations, rising to 2.2% (forecast: 2.0%).

Japan's national CPI data for November will be released on Friday, December 20. Preliminary forecasts suggest an acceleration in the overall CPI to 2.5% (from 2.3%) and the core CPI to 2.6% (from 2.3%).

If the data aligns with or exceeds expectations, USD/JPY may go into correction, presenting an opportunity to open long positions. Conversely, if CPI growth slows, the pair will likely continue its upward trajectory without significant pullbacks. The next upside target for USD/JPY is 158.20 (the upper line of the Bollinger Bands on the W1 timeframe), with a primary target of 160.50 (the upper line of the Bollinger Bands on the MN timeframe).

*यहां पर लिखा गया बाजार विश्लेषण आपकी जागरूकता बढ़ाने के लिए किया है, लेकिन व्यापार करने के लिए निर्देश देने के लिए नहीं |

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