Important events today:

13:30 UTC – US: Core Personal Consumption Expenditure Index

The Japanese Yen (JPY) is trying to consolidate its strong gains recorded over the past two days against the US Dollar (USD) and is declining during the Asian session on Friday. Japan’s core consumer price index (CPI) declined slightly in November as expected, raising uncertainty about the timing of when the Bank of Japan (BoJ) will abandon its confidence stance. Moreover, the minutes of the BoJ’s October monetary policy meeting showed that its members agreed on the need to patiently maintain the current accommodative policy stance, which in turn weakened the JPY.

Inflation in Japan, meanwhile, remains well above the BoJ’s 2% target. In addition, hopes that wage growth next year could outpace wage growth in 2023 suggest that the central bank is likely to start tightening policy as early as April, if not January. In contrast, current market pricing suggests the Federal Reserve (Fed) could start cutting interest rates as early as March 2024. This, along with downward revisions to the Q3 US GDP data, is forcing USD bulls to remain on the defensive and should halt the USDJPY pair’s modest rebound from the weekly low reached earlier today.

The aforementioned fundamental backdrop seems to be leaning in favor of the JPY bulls and suggests that the path of least resistance for the Dollar-JPY pair lies on the downside. Traders, however, are reluctant to make aggressive directional bets and prefer to wait for the release of the US Personal Consumption Expenditure (PCE) price index later in the North American session.

Recommendations: On a rebound from 142.80-143.00, Sell positions can be gained