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- Fed signals have shifted again, and traders lean toward a December 25bp rate cut.
- BoJ comments strengthen expectations for an early move as spring wage talks approach.
- USD/JPY climbs toward major highs and intervention chatter grows as volatility increases.
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The market shifted its view for the December Fed meeting in just a few days and now leans toward a 25bp rate cut. In Japan, rates stayed where they were, matching last month’s decision, but recent comments from the Bank of Japan point toward a possible move soon.
Outside finance, attention is fixed on the ongoing peace talks built around proposals from the United States and major European countries. We should know in the coming days whether this round produces an agreement that both sides can accept.
Fed’s December Decision in Focus
Investor expectations for the December Fed meeting have shifted again, and this time, traders see a higher chance of a 25bp rate cut. Comments from Christopher Waller and New York Fed President John Williams pushed those hopes higher, since both pointed to the possibility of a cut as early as next month.
Their remarks also shaped sentiment in Japan. There, however, the signals point in the opposite direction. Policymakers appear closer to an interest rate increase. Kazuyuki Masu has argued that the decision should come before the spring wage negotiations rather than after.
The rapid rise in USD/JPY is prompting talk that Japan may step into the currency market if the rate moves close to the long-term highs above 160 yen per dollar. Intervention becomes more likely if the Federal Reserve skips a hike in December, which would lift the US dollar further, and the Bank of Japan also decides to delay its own move until after the spring wage talks.
Based on current probabilities, this scenario seems unlikely for now, although several delayed macro releases from both the US and Japan could shift the outlook.
The question now is whether an intervention would work in the medium or long term. Recent examples show that measures like this, when they are not supported by a shift in government or central bank policy, tend to influence the market only for a short period. They serve mainly to slow the pace of the move and create a little breathing room. We should have the key decisions before the end of the year.
USD/JPY Moves Toward Major Highs
From the chart’s point of view, the pair shows a steady upward trend. The move is now close to this year’s peak near 159 yen per dollar.
Source: Investing
If this level breaks, the pair could move toward the long-term highs above 160 yen per dollar. The current upward move is supported by a steep trend line, and a drop below that line would hint at a pullback. In that case, the nearest target sits around the local support at 153 yen per dollar.
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Disclaimer: This article is written for informational purposes only. It is not intended to encourage the purchase of assets in any way, nor does it constitute a solicitation, offer, recommendation or suggestion to invest. I would like to remind you that all assets are evaluated from multiple perspectives and are highly risky, so any investment decision and the associated risk belongs to the investor. We also do not provide any investment advisory services.