The Japanese yen gained some much-needed breathing space on Tuesday (November 19), with the USD/JPY briefly falling below the 154 level to 153.97 and currently trading around 154.10, a drop of about 0.3%, as the US dollar faced profit taking after a strong rise and hitting a one-year high. The overnight low of the US dollar against the Japanese yen was supported at around 153.83.

Previously, the Governor of the Bank of Japan, Kazuo Ueda, as usual, did not give any indication on whether a rate hike is possible in December.

Rodrigo Catril, Senior Foreign Exchange Strategist at the National Australia Bank (NAB), said, "The recent weakness of the yen has led many market participants to expect a hawkish tone from Ueda, but he ultimately insisted on his recent statements

We believe that economic and price pressures provide strong reasons for a rate hike in December, but this will largely depend on whether there will be any political resistance. The Liberal Democratic Party has performed poorly in the recent House of Representatives elections and is seeking to regain public support

The Japanese yen has fallen by about 7% since October, and the US dollar broke through 156 against the yen for the first time since July last week, making traders wary of any intervention measures taken by Japanese authorities to support the yen.

Bank of Japan Governor Kazuo Ueda reiterated on Monday that the economy is moving towards sustained wage driven inflation and warned against keeping borrowing costs too low, leaving room for another rate hike as early as next month. This is the first time since Trump won the US presidential election two weeks ago that Kazuo Ueda has commented on monetary policy.

However, Ueda did not give any indication on whether there will be a rate hike in December, stating that various "uncertainties" need to be studied.

The Governor of the Bank of Japan has not given any new signals, "said Marc Chandler, Chief Market Strategist at Bannockburn Global Forex

The Bank of Japan unexpectedly raised short-term interest rates at its July meeting. The market believes that the possibility of the Bank of Japan raising interest rates by 25 basis points at its next policy meeting on December 19th is about 54%, which is not much different from before Ueda's speech.

The resistance of USD/JPY comes from the hourly chart, with the benchmark line at 154.75, the cloud zone at 155.00-31, and the 55 hour moving average at 155.15.

Today, there are options expiring for $370 million at 154.40-50 and $321 million at 155.50

More options will expire tomorrow - $793 million at 154.80, $923 million at 155.00, and $997 million at 156.00

The expiration of options above and the cautious attitude towards government intervention in the foreign exchange market may help limit the upward trend.

In the broader market, the US dollar is on the defensive, further breaking away from the one-year high set last week against a basket of currencies. The US dollar index fell 0.44% on Monday, closing at 106.20. On Tuesday in the Asian market, the US dollar index remained hovering around that level.

Last week, the US dollar index surged 1.6% to its highest level since November 2023. Jarrod Kerr, Chief Economist of Kiwibank, said, "After such large fluctuations, there will indeed be profit taking

Due to lower expectations for the Federal Reserve's interest rate cuts and the belief that the tax cuts proposed by President elect Trump, including tariffs, reduced immigration, and debt support, will stimulate inflation in the United States, the US dollar has risen by over 2% so far this month.

From a technical perspective, the 5-day, 10 day, and 21 day moving averages of the US dollar index have risen, with mixed research on momentum. The 21 day Bollinger Bands have climbed, indicating a bullish trend pattern. The goal is to test the 2023 high of 107.34, which should be resilient.

The 10 day moving average of 105.84 and Wednesday's low of 105.71 are the first support levels

If the closing is lower than last week's low of 104.93 and the 21 day moving average, the upward trend ends.

The EUR/USD rebounded from last week's one-year low on Monday, and the latest Asian market report on Tuesday was around 1.0590.

Two European Central Bank decision-makers stated on Monday that they are more concerned about the expected damage to Eurozone economic growth from the new US trade tariffs, rather than the impact on inflation.

AUD/USD rose 0.74% on Monday and closed at 0.6507. On Tuesday, the exchange rate fluctuated narrowly around 0.6507 in the Asian market and is currently trading around 0.6507.

The November monetary policy meeting minutes released by the Reserve Bank of Australia on Tuesday showed that policymakers believe there is currently no urgent need to adjust interest rates, but it is important for the central bank to be prepared to take action as the economic outlook develops. The Reserve Bank of Australia has maintained stable interest rates for a year.

The market has not yet fully priced a rate cut before May next year, and the likelihood of a rate cut in February after the release of the fourth quarter inflation report is only 38%.

Analysts point out that commodities have rebounded from recent declines, and the Australian dollar may be supported. However, the upward potential of the Australian dollar is limited due to concerns about the slowdown of interest rate cuts by the Federal Reserve and issues with major Asian countries.

Support level 0.6475-80, strong support level 0.6440-50, resistance levels 0.6515-20, 0.6535-40.

At the same time, the new Western Reserve will hold a meeting next week, and traders have already reflected their expectation of a 50 basis point rate cut by the central bank. The New Zealand dollar/US dollar is currently down 0.1%, at 0.5886 US dollars.

There are not many US economic data to be released this week, so we will continue to pay attention to the US real estate market data this trading day. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index rose from 43 in October to 46 in November, the highest since April, as people optimistically believe that the recent election will drive regulatory adjustments and stimulate housing construction.

In addition, the market is waiting for Trump to announce who he will choose as Treasury Secretary. According to numerous media reports, the list of potential candidates has been expanded to include former Federal Reserve Governor Kevin Warsh and billionaire Marc Rowan.

Chandler said, "My feeling is that from these appointments, and even this discussion about the Secretary of the Treasury, we hope to ensure that the Secretary of the Treasury supports tariff measures.