The Japanese Yen (JPY) traded near a two-week low against the US Dollar (USD) during the Asian session on Friday, with the USD/JPY pair moving above the 156.00 mark as investors awaited the outcome of the Bank of Japan's (BoJ) two-day meeting [1]. The JPY weakened following the release of Japan's Consumer Price Index (CPI) data, which showed headline inflation holding steady at 1.9% year-on-year, while core inflation unexpectedly eased to 1.7% in August. Notably, the core CPI excluding fresh food and energy remained below the BoJ's 2% target, dampening expectations for a more hawkish stance from the central bank and providing a modest lift to the USD/JPY pair [1].
Despite the CPI miss, traders are still pricing in a greater chance of a follow-through up move in December after the widely expected BoJ rate hike this Friday. BoJ Governor Kazuo Ueda's comments during the post-meeting press conference are expected to be closely scrutinized for guidance on the timing and pace of future tightening, which will be key in driving JPY movements and influencing the USD/JPY pair [1].
Technical analysis indicates that the USD/JPY pair maintains a capped tone below the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 50.0% Fibonacci retracement, with resistance levels at 156.44 (100-period SMA), 156.60 (50.0% retracement), 157.48 (61.8% retracement), 158.74, and 160.35. Immediate support is seen at 155.71 (38.2% retracement), 154.62 (23.6% retracement), and a deeper bearish extension toward 152.85 [1].
Meanwhile, US Dollar bulls have been subdued as Federal Reserve Chair Kevin Warsh’s focus on inflation calmed the recent selloff in the fixed-income market, pulling US bond yields away from multi-year highs. This dynamic may limit further upside for the USD/JPY pair ahead of the BoJ meeting, although spot prices appear poised to register gains for the first time in three weeks [1].
CONCLUSION
The Japanese Yen's weakness following softer core inflation data has increased anticipation around the Bank of Japan's policy decision, with traders watching for signals on future tightening. Technical resistance and support levels suggest the USD/JPY pair is consolidating, while subdued US Dollar sentiment may cap further gains. The market is positioned for potential volatility pending BoJ Governor Ueda's guidance.