Japanese Yen weakens further against US Dollar as hawkish Fed bets dominate

The Japanese Yen (JPY) continues to weaken against the US Dollar (USD), with the USD/JPY trading higher by 0.2% to around 157.70 during Wednesday's European session. This trend is attributed to the persistent outperformance of the US Dollar, which is reinforced by Federal Reserve (Fed) officials' predictions of more rate hikes to combat inflation.

These hawkish statements from both current and future Federal Open Market Committee (FOMC) participants bolster the perception that additional tightening is on the horizon, bolstering confidence in the US growth and yield advantage vis-à-vis the Euro, Pound and Yen.

While oil prices have declined over 13%, from its recent high of $102.11 to below $89.00, due to hopes of improved United States-Iran relations, fears of high inflation remain subdued. Speculation persists that Japan may intervene to support its currency, following the Bank of Japan's (BoJ) recent monetary policy announcement and spot rate checks by the Ministry of Finance (MoF) on Friday.

Speculative positioning data indicates a significant shift toward the Yen: foreign hedge fund (HF) positions turned net long Yen by 22% of open interest (OI) last Tuesday, while commercial trader Mrs. Watanabe is still in the money. CFTC positions also shifted, with Yen longs jumping to 22.2% OI from 2.2%. USD/JPY trades at 157.70, above the 20-period exponential moving average (EMA) at 156.77, suggesting a mildly bullish near-term bias.

Technical analysis reveals initial support at the 157.70 level and the 20-day EMA at 156.77, with traders closely monitoring psychological round numbers and potential caps at nearby technical resistance levels.