The Japanese Yen (JPY) strengthened 0.5% against the US Dollar (USD), pushing USD/JPY down to the key 155 level, as investors digested the Q4 Tankan business survey. Technical indicators are turning bearish, with the RSI dipping below 50. Attention now shifts to the Bank of Japan’s (BoJ) policy decision later this week, where a 25bps rate hike to 0.75% is widely anticipated alongside potential hawkish guidance and revised growth and inflation forecasts, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.
"The JPY is strong, up 0.5% vs. the USD and outperforming all of the G10 currencies in mixed trade as market participants respond to the release of the quarter Tankan business sentiment survey data. The readings were in line with expectations and the market reaction suggests that participants may have been leaning toward disappointment."
"The decline in USD/JPY has been notable, delivering a push to the psychologically important 155 level shifting the focus to the 50 day MA at 154.15. The confirmation of a bearish turn in technicals is important with the RSI pushing below 50 into bearish territory."
"Japan will release its preliminary PMI’s for December at 7:30pm ET however the highlight for this week will be the BoJ policy decision scheduled for the end of the week, where a 25pt hike to 0.75% is widely expected. Media have also reported on the strong possibility of a constructive adjustment to the forecast for growth, inflation, and a more hawkish guidance on rates and specifically widening the range of movement for the long end of the JGB curve."