The Japanese yen remains negative during the day on rising US bond yields, reviving USD demand

The Japanese yen is weakening against the US dollar, driven by a combination of factors.
A rebound in US bond yields and a positive risk tone are shifting away from the safe and sound haven JPY.
The sturdy boost in USD demand is contributing to the USD/JPY pair returning above the mid-150.00 level.

The Japanese yen (JPY) remains heavily bid against its US counterpart during Monday’s Asian session, allowing the USD/JPY pair to maintain intraday gains above the mid-150.00 mark. U.S. Treasury yields are regaining positive traction amid concerns that tariffs threatened by U.S. President-elect Donald Trump could push up consumer prices and set the stage for the Federal Reserve (Fed) to stop cutting interest rates. This helps revive demand for the US dollar (USD) and flows away from the less profitable JPY, which in turn provides a good rally for the currency pair.

However, any significant losses in the yen seem narrow as expectations for another interest rate boost by the Bank of Japan (BoJ) in December strengthen. Moreover, markets are pricing in a greater chance that the Fed will cut borrowing costs again later this month, which could keep traders from making aggressive directional bets around the USD/JPY pair. Investors may also choose to step aside ahead of critical U.S. macroeconomic releases scheduled for the beginning of the fresh month, including the closely watched Nonfarm Payrolls data (Friday’s NFP report.

Japanese yen bears maintain intraday control amid a confluence of negative factors

US President-elect Donald Trump has threatened to impose 100% tariffs on the so-called “BRICS” countries – Brazil, Russia, India, China and South Africa – if they replace the US dollar with another currency in international transactions.
This comes on top of Trump’s pledge to impose enormous tariffs on America’s three biggest trading partners – Mexico, Canada and China – and increases market concerns about a second wave of the global trade war.
Investors now seem confident that Trump’s tariff plans and expansionary policies could push up consumer prices, setting the stage for the Federal Reserve to stop cutting interest rates or possibly raise them again.
The prospects for a less dovish Fed stance are driving a fresh spike in U.S. bond yields, helping the U.S. dollar rebound from a near three-week low and seen to be causing currency outflows from the less-yielding Japanese yen.
Friday’s better consumer inflation data from Tokyo, Japan’s capital, signaled that core inflation was gaining momentum and supported the case for another interest rate hike by the Bank of Japan in December.
BOJ Governor Kazuo Ueda said on Saturday that more interest rate increases are imminent in the sense that economic data is in line with expectations, although he would like to see what momentum it gives to Shunto for the 2025 fiscal year.
On Monday, Japan’s Ministry of Finance said capital spending rose 8.1% year-on-year in the third quarter, signaling that sturdy domestic demand underlies the brittle economic recovery.
Russian and Syrian warplanes carried out a series of airstrikes against Syrian rebels led by the jihadist group Hayat Tahrir al-Sham, which captured most of Aleppo and entered the city of Hama in a shocking offensive on Saturday.
Ukrainian President Volodymyr Zelensky has stated that he is willing to return the occupied territory of Ukraine to Russia, albeit under certain conditions, in order to reach a ceasefire agreement and achieve peace.
China’s official manufacturing purchasing managers’ index (PMI) rose to 50.3 in November from 50.2, while the NBS non-manufacturing PMI fell to 50.0 in the month from October’s 50.2.
China’s Caixin Purchasing Managers’ Index (PMI) rose to 51.5 in November after recording 50.3 in October on hopes the government would introduce more stimulus to boost domestic demand.
Investors are now looking to critical U.S. macroeconomic releases this week, including the closely watched monthly U.S. jobs report (NFP), for clues about the future path of the Fed’s interest rate cuts and any significant momentum.

USD/JPY may struggle to capitalize on the up move, 151.00 is key

From a technical perspective, any further upward move is likely to encounter stiff resistance near the round 151.00 mark with negative oscillators on the daily chart. However, continued strength above this level could trigger a short-covering rally and push USD/JPY to the intermediate 151.65 level on the way to the 152.00 level. The latter represents the very critical 200-day Simple Moving Average (SMA) and should act as a key focal point. Some further buying will suggest that the recent corrective pullback from a multi-month high has ended and has shifted the short-term bias back in favor of bullish investors.

On the other hand, the psychological line of 150.00 currently appears to be protecting immediate declines from Friday’s low around 149.45. Some follow-up selling could drag the USD/JPY further towards the 149.00 round mark on the way to the next relevant support at 147.60-147.55 and the 148.00 level (50% retracement level from the September to November gains).