Japanese Yen recovers from multi-month low against USD, lacks bullish conviction

• The Japanese Yen gains positive traction and draws support from a combination of factors.
• An unexpected dip in Japan's unemployment rate and intervention fears underpin the JPY. 
• The BoJ rate-hike uncertainty should cap gains ahead of this week's central bank event risk.

The Japanese Yen (JPY) strengthened a bit against its American counterpart during the Asian session on Tuesday and moved away from a nearly three-month low touched the previous day. An unexpected fall in Japan's unemployment rate during September pointed to tighter labor market conditions, which could fuel consumer spending and demand-driven inflation. Adding to this, remarks by Japan's Finance Minister Katsunobu Kato revived fears of a possible government intervention and offer support to the JPY. This, along with subdued US Dollar (USD) price action, exerts some downward pressure on the USD/JPY pair. 

Meanwhile, Japan Democratic Party for the People (DPP) leader Yuichiro Tamaki opposed further Bank of Japan (BoJ) rate hikes. Apart from this, a positive risk tone should keep a lid on any meaningful appreciation for the safe-haven JPY. Furthermore, the recent upsurge in the US Treasury bond yields, bolstered by bets for a less aggressive policy easing by the Federal Reserve (Fed) and deficit-spending concerns after the US election, should contribute to capping the lower-yielding JPY. Traders might also refrain from placing aggressive directional bets ahead of the BoJ meeting and important US macro releases this week. 

Daily Digest Market Movers: Japanese Yen draws some support from the upbeat domestic data and intervention fears

• According to a report published by Japan's Statistics Bureau this Tuesday, the unemployment rate dipped from 2.5% previous to 2.4% in September and the job-to-applicant ratio rose to 1.24. 
• The data reflects strong demand for labor and supports prospects of rising wages, which might lead to a higher inflation outlook and should allow the Bank of Japan to hike interest rates again.
• Japan's Finance Minister Katsunobu Kato said that he is closely watching FX moves, including those driven by speculators, with a higher sense of vigilance, reviving intervention fears.
• Japan's Prime Minister Shigeru Ishiba is reportedly seeking a coalition with the Democratic Party for the People (DPP) after failing to retain a majority in the lower house election over the weekend.
• DPP leader Yuichiro Tamaki said that the BoJ should avoid big policy change now with real wages still at a standstill and wants policymakers to scrutinize whether real wages turn positive stably in guiding fiscal, monetary policy.
• The US Treasury bond yields retreat further from a multi-month top and keep the US Dollar bulls on the defensive below the highest level since July 30, exerting pressure on the USD/JPY pair. 
• The recent upbeat US macro data dampened hopes for a more aggressive easing by the Federal Reserve and should act as a tailwind for the US bond yields amid deficit-spending concerns after the US election.
• With the US presidential election approaching, the latest poll indicates a tight race to the White House between Vice President Kamala Harris and the Republican nominee Donald Trump. 
• Traders now look to Tuesday's US economic docket - featuring the Conference Board's Consumer Confidence Index and Job Openings and Labor Turnover Survey (JOLTS) - for short-term impetus. 
• The focus, however, will remain on the BoJ decision on Thursday and the key US macro data - the Advance Q3 GDP print, the Personal Consumption Expenditures (PCE) Price Index and the Nonfarm Payrolls (NFP) report. 

Technical Outlook: USD/JPY corrective slide could be seen as a buying opportunity and is more likely to remain limited

From a technical perspective, last week's breakout through the 150.65 confluence - comprising the 100-day Simple Moving Average (SMA) and the 50% Fibonacci retracement level of the July-September downfall - was seen as a fresh trigger for bulls. That said, the overnight failure to find acceptance or build on the momentum beyond the 61.8% Fibo. level warrants some caution. Moreover, the Relative Strength Index (RSI) on the daily chart remains close to the overbought zone, making it prudent to wait for some near-term consolidation or a further pullback before positioning for further gains. 

Any subsequent slide, however, is likely to attract some dip-buyers and remain limited near the overnight swing low, around the 152.65 region. Some follow-through selling, however, could drag the USD/JPY pair to the 152.00 mark en route to the 151.45 support and the 151.00 mark. The downward trajectory could extend further towards challenging the 150.65 confluence resistance breakpoint, which should now act as a key pivotal point and a strong base for spot prices.

On the flip side, the 154.00 mark could offer some resistance ahead of the 154.35-154.40 supply zone. Some follow-through buying should pave the way for a move towards reclaiming the 155.00 psychological mark, above which the USD/JPY pair seems all set to test the late-July swing high, around the 155.20 region.