Japanese Yen extends its consolidative price move against USD ahead of FOMC Minutes

• The Japanese Yen continues to be undermined by the BoJ rate-hike uncertainty. 
• The widening US-Japan yield differential further weighs on the lower-yielding JPY.
• The Fed’s hawkish stance acts as a tailwind for the USD and the USD/JPY pair. 

The Japanese Yen (JPY) consolidates against its American counterpart heading into the European session on Wednesday and remains close to a multi-month low touched the previous day. Doubts over the likely timing when the Bank of Japan (BoJ) will hike interest rates again, along with the recent widening of the US-Japan rate differential, turn out to be key factors that continue to undermine the lower-yielding JPY. 

However, speculations that Japanese authorities might intervene in the market to prop up the domestic currency and geopolitical risk hold back traders from placing fresh bearish bets around the safe-haven JPY. Meanwhile, the US Dollar (USD) struggles to gain any meaningful traction as bulls opt to wait for the FOMC meeting Minutes. This further contributes to keeping a lid on any further gains for the USD/JPY pair. 

Japanese Yen traders remains on the sidelines ahead of FOMC Minutes

• Japan’s Finance Minister Katsunobu Kato was out with some verbal intervention on Tuesday and said that the government will take appropriate action against excessive FX moves, including those driven by speculators.
• The Bank of Japan has kept markets guessing on how soon it could hike interest rates again, which continued to undermine the Japanese Yen and lifted the USD/JPY pair to a near six-month high on Tuesday.
• BoJ Governor Kazuo Ueda said on Monday that the central bank will raise interest rates further if the economy continues to improve, though the timing depends on economic, price and financial developments.
• Some investors are betting on the possibility of a BoJ rate hike at the January 23-24 meeting amid the broadening inflationary pressures in Japan, while others see a stronger chance of a move in March or beyond.
• The yield on the benchmark 10-year Japanese government bond (JGB) rose to its highest level since July 2011, though it failed to provide any respite to the JPY bulls amid the widening US-Japan yield differential.
• The US Treasury yields extended the recent uptrend after data released on Tuesday pointed to a resilient economy, suggesting that the Federal Reserve could cut interest rates fewer times this year than expected.
• The Institute for Supply Management reported that its Non-Manufacturing Purchasing Managers' Index (PMI) rose to 54.1 in December and the Prices Paid component rose to the highest since September 2023.
• Separately, the Job Openings and Labor Turnover Survey (JOLTS) showed that the number of job openings on the last business day of November stood at 8.09 million, up from the 7.83 million reported in October.
• The data was consistent with a strong pace of economic activity, which, along with US President-elect Donald Trump's policies, could reignite inflationary pressures and cast doubt on further rate cuts by the Fed. 
• Traders now look forward to the US economic docket – featuring the release of the ADP report on private-sector employment and the usual Weekly Initial Jobless Claims data – for short-term opportunities. 
• The focus, however, will remain glued to the FOMC meeting Minutes, due later during the US session, which should influence the US Dollar (USD) ahead of the closely-watched US Nonfarm Payrolls report on Friday. 

USD/JPY conoslidates near multi-month top, bullish potential intact

From a technical perspective, acceptance above the 158.00 round figure, along with positive oscillators on the daily chart, favor bulls for additional gains. Hence, a subsequent strength towards the 159.00 mark, en route to the 159.45 intermediate hurdle and the 160.00 psychological mark, looks like a distinct possibility.

On the flip side, the 157.60 area now seems to protect the immediate downside ahead of the 157.35-157.30 zone and the 157.00 mark. The latter should act as a pivotal point, below which the USD/JPY pair could slide to the 156.25 intermediate support en route to the 156.00 mark. Some follow-through selling might negate the positive bias and pave the way for a deeper corrective decline.