Key events today:

12:30 UTC: USD – Unemployment Rate.

The Japanese yen is weakened by doubts regarding the potential timing of the Bank of Japan’s next rate hike.

The US dollar remains near a two-year high, supporting USD/JPY ahead of the US NFP report.

The Japanese yen (JPY) showed growth in response to comments by Japan’s Economy Minister Ryosei Akazawa during Friday’s Asian session, though it lacks bullish confidence amid uncertainty over the Bank of Japan’s (BoJ) rate hike. Data released today showed that real household spending in Japan fell for the fourth month in November, indicating economic instability. This gives the Bank of Japan additional reason to remain cautious about further interest rate hikes, which could continue to undermine the yen.

Moreover, the yield differential between US and Japanese bonds has widened significantly over the past month amid the Federal Reserve’s hawkish stance. This could weigh on the Japanese yen’s yield and provide a tailwind for the USD/JPY pair amid the bullish trend for the US dollar (USD). Meanwhile, traders might prefer to stay on the sidelines and wait for the US Non-Farm Payroll (NFP) report before placing aggressive directional bets on the currency pair.

Recommendations: Watch the 158.60 level, with a preference for trading primarily Buy orders.