The Japanese yen climbed to multi-week highs against the dollar amid trade war concerns

The Japanese yen is gaining on Trump’s tariff threats and the recent decline in US bond yields.
The USD is trying to lure buyers and on Wednesday it drags the USD/JPY pair to a three-week low.
Traders are now looking to the US Q3 GDP advance print and the US PCE price index for fresh momentum.

The Japanese yen (JPY) continues to attract some inflows on the back of US President-elect Donald Trump’s tariff threats. Moreover, the recent decline in U.S. Treasury yields following the nomination of Scott Bessent as U.S. Treasury Secretary and expectations that he will be able to reduce budget deficits provides additional support for the lower-yielding yen. This, along with feeble price action in the United States Dollar (USD), brings the USD/JPY pair to a near three-week low around 152.70-152.65 during Wednesday’s Asian session.

That said, uncertainty surrounding the Bank of Japan’s (BoJ) next interest rate hike in December could keep traders from placing aggressive bets on the yen rising. Meanwhile, the easing of geopolitical tensions as part of the ceasefire agreement between Israel and Hezbollah could facilitate reduce safe-haven JPY gains. On the other hand, the US dollar is likely to be supported by bets on slower interest rate cuts by the Federal Reserve (Fed), which could further support the USD/JPY pair ahead of key US macro data due this evening.

The Japanese yen strengthens as Trump’s tariff threats continue to fuel inflows from some havens

Fears that U.S. President-elect Donald Trump’s tariffs will spark trade wars and impact the global economy continue to drive inflows into the Japanese yen.
The nomination of Scott Bessent as U.S. Treasury secretary provided some respite for U.S. bond investors and pushed the benchmark 10-year U.S. Treasury yield to a two-week low on Monday.
Data released on Tuesday showed rising inflation in Japan’s services sector, leaving the door open for another interest rate hike by the Bank of Japan at its next policy meeting in December.
Japanese Prime Minister Shigeru Ishiba said Tuesday that he will ask companies to implement significant wage increases during the annual “Shuntō” negotiations next spring.
Minutes from the November FOMC meeting showed that the Committee could pause easing interest rates and keep them at tight levels if inflation remains elevated.
Officials expressed confidence that inflation is falling and the labor market is mighty, which should allow the Federal Reserve to continue cutting interest rates, albeit at a gradual pace.
According to CME Group’s FedWatch tool, investors are currently pricing in a 63% probability that the Fed will cut borrowing costs by 25 basis points in December.
The US dollar is struggling to gain significant traction and is losing ground near the weekly low reached on Tuesday, putting additional pressure on the USD/JPY pair.
The Lebanon-based Hezbollah militant group said it fired drones toward Israel on Tuesday evening, while Israel carried out airstrikes on Beirut’s southern suburbs.
Moments later, US President Joe Biden announced that Lebanon and Israel had agreed to a ceasefire agreement, which would come into force from 02:00 GMT this Wednesday.
Traders are now eagerly awaiting the first revision of the third-quarter U.S. GDP print and the U.S. Personal Consumption Expenditures (PCE) price index for a significant boost.
Market attention will then focus on a immense amount of Japanese macro data, including the Core CPI report from Tokyo, which will be published during Friday’s Asian session.

USD/JPY may now look to test key support near the 152.00 level

From a technical perspective, an overnight close below the 100-period straightforward moving average (SMA) on the 4-hour chart and the subsequent decline favors bearish investors. Moreover, the oscillators on the daily chart have just started gaining strength and pose the prospect of support for further USD/JPY weakening. Therefore, continued weakness towards the all-important 200-day SMA, currently pegged around the 152.00 level, appears to be a distinct possibility. A convincing break below the latter could expose the monthly low around 151.30-151.25.

On the other hand, the round value of 153.00 may now pose a direct obstacle ahead of the 153.25-153.30 area. Sustained strength beyond the latter could trigger an escalate in brief coverage and allow USD/JPY to reclaim the 154.00 level. The upward trajectory could extend further towards the intermediate hurdle of 154.60 on the way to the psychological level of 155.00 and another significant hurdle near the 155.35-155.40 area.