Yen regains safe-haven status as growth worries displace inflation concerns

USD:

Growth concerns, not inflation worries, have been the main driver of the US dollar lately. Even with last week's hotter US inflation figures, Treasury yields fell sharply and rate hike expectations were repriced slightly more dovish. With long dollar positions stretched, an unwind has begun, and it could extend further if growth anxieties intensify.

Tomorrow's US Flash PMIs may then prove a key catalyst. Solid data would ease those fears and support the dollar. A weak report, in contrast, would likely add to growth concerns and push long-term Treasury yields and the greenback lower.

JPY:

The yen has begun behaving like a safe haven as market attention shifts to growth risks. Daily moves in the currency have tracked swings in risk sentiment, while BoJ rate expectations have stayed broadly unchanged.

The BoJ is expected to raise rates by 25 basis points in December and deliver two more hikes in 2027. Should global growth deteriorate, however, the central bank might again tighten into a slowdown.

Historically, the BoJ has been criticised for tightening too late because deflation fears have repeatedly clouded its judgment. This time may not differ, but the yen would still be supported in a global downturn because of extreme bearish positioning and safe-haven flows.

USDJPY daily timeframe technical analysis

USDJPY is consolidating between support at 155.00 and resistance at 160.50 on the daily chart. This timeframe offers little information; buyers may have a better risk-reward setup near support, while sellers could look for short opportunities around resistance.

USDJPY 4-hour timeframe technical analysis

On the four-hour chart, the price is rejecting the minor support zone near 156.60. Buyers are likely to step in here, with defined risk below that level, positioning for a rally to 160.50. Sellers, conversely, would want a break lower to enter shorts and target 155.00 next.

USDJPY 1-hour timeframe technical analysis

The one-hour chart adds little; from a risk-management perspective, buyers have a better entry near support, while sellers would need a breakdown to open the door for new lows.

Upcoming catalysts

US jobless claims data arrive today, and tomorrow the week ends with Japan's CPI report and the US Flash PMIs. Middle East developments will also remain in focus.