Japanese Yen remains depressed against USD, hangs near its lowest level since late July

• The Japanese Yen continues to be undermined by the uncertainty over the BoJ’s rate-hike plans.
• Rising US bond yields turn out to be another factor exerting pressure on the lower-yielding JPY. 
• Intervention fears and a softer risk tone limit losses for the JPY, capping the upside for USD/JPY.

The Japanese Yen (JPY) struggles to capitalize on a modest intraday uptick and drops to its lowest level since late July against its American counterpart during the Asian session on Tuesday. The growing market conviction that the Bank of Japan (BoJ) will forgo raising interest rates again this year amid uncertainty over the new political leadership’s preference for the monetary policy continues to undermine the JPY. Apart from this, the recent upswing in the US Treasury bond yields to their highest level in almost three months turns out to be another factor weighing on the lower-yielding JPY ahead of Japan’s general election on October 27. 

Meanwhile, the US Dollar (USD) preserves its recent strong gains registered since the beginning of this month amid bets for a less aggressive easing by the Federal Reserve (Fed) and assists the USD/JPY pair in attracting some dip-buyers near mid-150.00s. That said, fears that Japanese authorities will intervene to prop up the domestic currency hold back traders from placing fresh bearish bets around the JPY. Apart from this, a softer risk tone offers some support to the safe-haven JPY and contributes to capping the currency pair. Nevertheless, the fundamental backdrop favors bulls and supports prospects for a further near-term appreciating move.

Daily Digest Market Movers: Japanese Yen struggles for a firm intraday direction amid mixed fundamental cues

• The Japanese Yen has attracted some buyers on Tuesday amid speculations about possible government intervention, especially after the recent fall below the 150.00 psychological mark against its American counterpart. 
• Japan’s vice finance minister for international affairs, Atsushi Mimura, said last Friday that excess volatility in the FX market is undesirable and that authorities are closely watching FX moves with a high sense of urgency.
• The Bank of Japan Governor Kazuo Ueda signaled last week that the central bank is not in a rush to raise interest rates further and emphasized the need to focus on the economic impact of unstable markets and overseas risks.
• Furthermore, dovish comments from Japanese Prime Minister Shigeru Ishiba add a layer of uncertainty over the new political leadership’s preference for the monetary policy, which is likely to act as a headwind for the JPY. 
• Meanwhile, the US Dollar jumped to its highest level since early August amid growing conviction that the Federal Reserve will proceed with modest rate cuts over the next year as the US economy remains relatively healthy. 
• Dallas Fed President Lorie Logan said on Monday that she expects gradual rate cuts if the economy meets forecasts and that the US central bank will need to be nimble with monetary policy choices amid risks to inflation target. 
• Separately, Minneapolis Fed President Neel Kashkari noted that investors should expect a modest pace of rate cuts over the next few quarters, though evidence of quick labor market weakening could lead to faster rate cuts.
• Adding to this, Kansas Fed President Jeffrey Schmid said that the US central bank must prevent significant fluctuations in interest rates and urged careful, steady, and purposeful methods for reducing interest rates.
• Meanwhile, expectations that Donald Trump’s win in the November 5 US Presidential election could see the launch of further potentially inflation-generating tariffs triggered the overnight selloff in US government debt.
• The yield on the rate-sensitive 2-year US government bond closed at its highest since August 19 on Monday, while the benchmark 10-year US Treasury yield touched the highest since July 26, underpinning the US Dollar.

Technical Outlook: USD/JPY seems poised to appreciate further beyond 151.60 intermedaite hurdle

From a technical perspective, any subsequent slide now seems to find immediate support near the 150.30-150.25 region ahead of the 150.00 psychological mark. A convincing break below the latter could make the USD/JPY pair vulnerable to an accelerated drop further towards the 149.65-149.60 intermediate support en route to the 149.10-149.00 area. Some follow-through selling will suggest that the positive move witnessed over the past month or so has run its course and shift the near-term bias in favor of bearish traders. 

On the flip side, bulls might now wait for a sustained strength above the 151.00 mark before placing fresh bets. Given that oscillators on the daily chart are holding comfortably in positive territory, the USD/JPY pair might then climb to the 151.60 area before aiming to reclaim the 152.00 round figure. The momentum could extend further towards the 152.65-152.70 region en route to the 153.00 mark.