USD/JPY licks its wounds at 15-week low, focus on BOJ’s Kuroda, US NFP

• USD/JPY remains sidelined after declining to the lowest levels since mid-August.
• Cautious mood ahead of the key US data, speech from BOJ’s Kuroda probe bears after heavy downside.
• Chatters surrounding BOJ’s tweak propel the Yen, higher odds favoring Fed’s 50 bps rate hike weigh on US Dollar.
• BOJ’s Kuroda must defend easy money policy to push back bears as US NFP is likely to disappoint.

USD/JPY consolidates recent losses at the lowest levels in nearly four months as bounces off 135.03 to 135.50 as Tokyo opens on Friday.

The Yen pair’s latest rebound could be linked to the cautious mood ahead of a speech from Bank of Japan (BOJ) Governor Haruhiko Kuroda and the key US employment data for November.

Even so, the USD/JPY pair remains pressured amid chatters surrounding the Bank of Japan’s policy change.

Recently, Japan Finance Minister Shunichi Suzuki says he will continue to carefully monitor moves in FX. Before him, Japanese media Asahi quotes Bank of Japan Board Member, Naoki Tamura, as saying, “The Bank of Japan should conduct a review of its monetary policy framework and the feasibility of its 2% inflation target.”

It’s worth noting that BOJ board member Asahi Noguchi recently signaled the Japanese central bank’s readiness to withdraw stimulus if inflation numbers appear too strong, which in turn drowned the USD/JPY prices.

Contrary to the hawkish concerns surrounding the BOJ, hopes of slower rate hikes from the US Federal Reserve (Fed) exert downside pressure on the USD/JPY prices.

The dovish bias of the Federal Reserve (Fed) Chairman Jerome Powell, as well as downbeat comments from US Treasury Secretary Janet Yellen, previously raised hopes of an easy rate hike from the US central bank. Following that, Federal Reserve (Fed) Governor Michelle Bowman stated that (It is) appropriate for us to slow the pace of increases. Before him, Fed Governor Jerome Powell also teased the slowing of a rate hike while US Treasury Secretary Yellen also advocated for a soft landing. Further, Vice Chair of supervision, Michael Barr, also said, “We may shift to a slower pace of rate increases at the next meeting.”  It’s worth noting that the recent comments from New York Fed’s John Williams seemed to have tested the US Dollar bears as the policymakers stated that the Fed has a ways to go with rate rises.

Other than the central bank concerns, improvement in China’s Covid conditions and downbeat US data also weigh on the USD/JPY prices.

That said, the benchmark US 10-year Treasury bond yields slumped to 3.50% while the two-year counterpart printed 4.23% while poking the lowest levels since October, around 3.53% and 4.26% by the press time. However, Wall Street closed mixed but the S&P 500 Futures remain mildly offered at the latest.

Moving on, BOJ’s Kuroda will be crucial for the USD/JPY pair’s immediate moves amid hawkish concerns and may weigh on the prices. However, the Governor is famous for his dovish comments and hence can defend the latest corrective bounce ahead of a likely negative move due to the expectedly softer US employment data.

Also: Nonfarm Payrolls Preview: Dollar selling opportunity? Low expectations to trigger temporary bounce

Technical analysis

USD/JPY rebound appears elusive unless the quote stays beyond the previous support line from late May, near 137.70 by the press time. That said, the 200-DMA restricts the pair’s immediate downside to around 134.50.