November 10, 2022 01:57 AM ET
By:AnalysisWatch
USD/JPY is struggling to build on the previous day's nice bounce from the 145.15-145.10 support zone, or a near two-week low, and is facing a fresh bid on Thursday.
The pair remains on the defensive during the early European session and currently sits near the daily low, just above the 146.00 round figure.
A small drop in the US dollar, accompanied by some repositioning trades ahead of key US macroeconomic data, proves to be a key factor driving some selling around the USDJPY pair.
However, the drop remains muted as traders seem reluctant to make aggressive bets ahead of the latest US consumer inflation figures, due later on Thursday.
The crucial US CPI report will play an important role in determining the Fed's policy tightening path, which should influence near-term dollar price dynamics and provide further directional impetus to the major.
Nevertheless, markets continue to price in the possibility of a Fed rate hike of at least 50 basis points in December. In contrast, the Bank of Japan has so far shown no intention of raising interest rates.
Moreover, the BoJ remains committed to keeping the 10-year bond yield at zero. In fact, BoJ Governor Haruhiko Kuroda reiterated on Thursday that the central bank must continue to underpin the fragile economic recovery with an accommodative monetary policy.
Kuroda added that economic uncertainty is extremely high and that deeper negative rates are an option if necessary.
This marks a major divergence compared to a more hawkish Fed and supports the prospects for the emergence of some buying around the USD/JPY pair.
In addition, the fact that the head of the Bank of Japan has dismissed hopes of direct FX intervention to safeguard the domestic currency reinforces the positive bias.
Therefore, any further decline could still attract some buyers and is more likely to remain limited, at least for the time being. That said, a convincing break below the psychological 145.00 mark will negate the constructive outlook.