The USD/JPY pair is trading on a stronger note near 161.40 after reaching a new high for this move near 161.75 during the early Asian trading hours on Wednesday [7d176b31]. The divergence in monetary policy between Japan and the US continues to undermine the JPY, while the rising expectation of Fed rate cuts and fear of FX intervention might cap the pair's upside [7d176b31] [a8745b28].
Market players remain focused on the possible foreign exchange intervention from the Bank of Japan (BoJ), which might underpin the JPY in the near term and create a headwind for the USD/JPY [7d176b31]. The Japanese authorities are concerned about the impact of 'rapid and one-sided' FX moves on the Japanese economy and they might intervene in the FX market to prevent the JPY from depreciating [7d176b31] [a8745b28].
On the US docket, traders will closely watch the US June employment data, including Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings. The recent softer US PCE inflation data and weaker-than-expected Services PMI fuel expectations of Fed interest rate cuts this year [a8745b28]. Fed Chair Jerome Powell said US inflation is cooling again, but more evidence would be needed before the Fed would cut rates. The weaker US Manufacturing PMI data on Monday and softer PCE inflation reports last week have spurred the expectation of a Federal Reserve (Fed) rate cut this year and weighed on the US Dollar (USD). Fed officials penciled in just one rate cut in its June meeting. Traders are now pricing in a nearly 63% chance for a 25 basis points (bps) rate cut from the Fed in September, up from 58% on Monday, according to the CME FedWatch tool [7d176b31].
The US NFP data is estimated to show 190K job additions in June, while the Unemployment Rate is expected to remain unchanged at 4%. The Average Hourly Earnings are forecast to drop to 3.9% YoY in June from 4.1% in May [a8745b28].
According to an analysis from Investing.com, the USD/JPY pair is currently trading at 161.90 in a rising wedge pattern. If the wedge is broken, there could be a continuation to the ATR Target at 161.08, with a 0.618 Fibo further at 161.04. The average daily true range (ATR) for the pair is 89 pips per day, and its 90-day average is 109 pips per day. The analysis suggests that the USDX is currently down [d6097dda].
The USD/JPY pair is trading above 161.00 on Thursday, amid the closure of U.S. markets due to a public holiday. The 30-year Japanese sovereign bond sale went smoothly, easing concerns about allocation problems. Traders are worried about the Bank of Japan ending its bond-buying program, which is causing the Japanese yen to trade higher against the U.S. dollar. The U.S. Dollar Index (DXY) took a hit due to weaker-than-expected economic data. The USD/JPY pair has retreated from its peak at 161.99 and traders are watching for significant moves in the yen and potential intervention by Japanese authorities. The yield differentials are significant for the USD/JPY outlook, and foreign exchange intervention may be imminent due to the weak yen. The Nikkei 225 rose, benefiting export-dependent Japanese industries. The U.S. dollar is facing challenges due to declining U.S. Treasury yields and weak economic data. The Japanese Ministry of Finance may issue a new type of floating-rate bond to mitigate risks from rising bond yields. Federal Reserve Chairman Jerome Powell has a somewhat hawkish stance, but wants more evidence before cutting interest rates. Technical analysis suggests a bullish bias for the USD/JPY pair, but caution is advised due to overbought conditions. The first major support level is at 160.32. The future of the pair depends on potential intervention by the Japanese Ministry of Finance and the Bank of Japan's interest rate hike announcement. The correction appears to be deep, and if the support level is broken, a sharp decline is likely. The pound has not reacted significantly to Labour's landslide win. Gold prices are near a four-week high due to a U.S. economic slowdown. Canadians prefer cash over crypto. Tata Steel has shut down one of its blast furnaces. S&P 500 CEO pay has increased by 112%. Gig economy jobs are stifling wage growth. The Foodservice Price Index has hit a 28-month low. Carlsberg has struck a deal with Pepsi for a £3 billion takeover of Britvic. The best accommodation options for business travelers between London and Singapore. [8e1121b5]
According to a recent analysis, the yen is gaining against the dollar for the first time in over a month, but intervention fears remain high. The yen has lost 12% of its value since the beginning of the year. Traders sold the yen and bought the dollar due to the wide gap in rates between the US and Japan. The Bank of Japan (BoJ) has intervened in the market twice, but the impact was temporary. Japan's Finance Minister warned of keeping a close eye on financial markets. The dollar is bruised due to downbeat economic data, raising the likelihood of a September Fed rate cut to 73%. The USD/JPY price has shifted from bullish to bearish, with the RSI indicating strong downside momentum. The path is clear for the price to revisit support levels like 160.00 and 158.00 [02d7a68c].