On Thursday, the Japanese Yen (JPY) gave up some of its recent gains. But after the USD/JPY pair fell to a one-month low of 155.36 due to alleged intervention by Japanese authorities, the JPY had strengthened against the USD. Traders are still on the lookout for potential new interventions.
According to Reuters, which quoted Kyodo News, Japan’s top currency ambassador Masato Kanda stated on Wednesday that there was no cap on the number of times authorities may step in if speculators caused “excessive” changes in the currency market.
The US Treasury yield curve is somewhat higher, which helps the US dollar. However, given the strong possibility of a rate-cut decision by the Federal Reserve (Fed) at its September policy meeting, the greenback may limit its gains.
On Wednesday, US central bank governor Christopher Waller stated that a reduction in interest rates is “getting closer.” Thomas Barkin, the president of the Richmond Fed, said that the rate of inflation has started to decline and that he hoped it would continue, according to Reuters.
Markets now predict a 93.5% chance of a 25 basis point rate drop at the September Fed meeting, up from 69.7% a week ago, according to CME Group’s FedWatch Tool.
Daily Digest Market Movers: Japanese Yen inches lower as US Dollar recovers
- Japan’s merchandise trade balance total for the June-ended year increased to ¥224 billion in surplus compared to ¥240 billion in deficit and ¥-1,220.1 billion in deficit the previous year.
- Japan’s YoY exports increased by 5.4% in June, less than the 6.4% predicted growth and a sharper decrease from the 13.5% increase in the prior period. In the meantime, import growth plummeted to 3.2%, far less than the previous 9.5% rise and the predicted 9.3%.
- Donald Trump warned Fed Chair Jerome Powell not to lower US interest rates before November’s presidential election in an interview with Bloomberg News on Tuesday. But Trump also said that if Powell kept up his “doing the right thing” at the Federal Reserve, he would be allowed to finish his term if re-elected.
- The Bank of Japan (BoJ) entered the foreign exchange market on consecutive trading days last Thursday and Friday, according to data released on Tuesday. According to Nikkei Asia, the BoJ’s Tuesday current account balance data shows that various transactions in the government sector are expected to drain about ¥2.74 trillion ($17.3 billion) in liquidity from the financial system on Wednesday.
- Dr. Adriana Kugler, a member of the Federal Reserve (Fed) Board of Governors, recognized on Tuesday that inflationary pressures have decreased, but she underlined that the Fed still needs more information to support a rate cut. According to Reuters, Kugler suggested that it could be fair to keep existing rates in place for a while longer if impending data does not support the idea that inflation is heading toward the 2% target.
- For the most part, US retail sales in June met projections. Following a 0.3% increase (raised from 0.1%) in May, retail sales in the US remained stable at $704.3 billion in June, in line with market expectations.
- In an indication that a move toward interest rate reductions may not be far off, Fed Chair Jerome Powell stated on Monday that the three US inflation readings this year “add somewhat to confidence” that inflation is on track to meet the Fed’s objective sustainably.
Technical Analysis: USD/JPY holds ground above 156.00
On Thursday, USD/JPY traded at 156.30. The pair is below its 9-day Exponential Moving Average (EMA), according to the daily chart analysis, indicating short-term negative momentum. This suggests that it could be wise to wait to purchase until the trend exhibits indications of reversal. Furthermore, the 14-day Relative Strength Index (RSI), a momentum indicator, is below the 50 level, indicating confirmation of a negative bias.
Important support for the USD/JPY pair may be found at 154.55, which was June’s low. Should the pair fall below this level, pressure may be applied to negotiate the area surrounding May’s low at 151.86.
Immediate resistance is seen on the upswing at 158.27, which is the nine-day Exponential Moving Average (EMA). The USD/JPY pair may retest the pullback resistance near the psychological level of 162.00 if a breakthrough occurs above this level.
