The Japanese Yen (JPY) maintained its stability, potentially influenced by verbal interventions from Japanese authorities. Masato Kanda, Japan’s top currency diplomat, emphasized readiness to intervene if necessary, warning against adverse economic impacts from exchange rate fluctuations, according to Reuters.
Meanwhile, the US Dollar Index (DXY), which gauges the USD against major currencies, experienced slight declines as US Treasury bond yields retreated. However, downward pressure on the USD could be limited after higher-than-expected US Purchasing Managers Index (PMI) figures on Friday sparked speculation of delayed interest rate cuts. CME FedWatch Tool data indicated a 65.9% probability of a Fed rate cut in September, down from 70.2% the previous week.
Market Insights and Economic Developments
The Bank of Japan‘s June meeting revealed expectations for gradual increases in underlying inflation, aligning with the price stability target by the second half of the projection period.
In the US, June’s Composite PMI surpassed expectations, with Manufacturing PMI at 51.7 and Services PMI at 55.1, indicating robust sectoral performance.
Bank of Japan Deputy Governor Shinichi Uchida signaled readiness to adjust monetary support in line with economic and price forecasts, suggesting potential future rate hikes.
Japan reaffirmed commitment to achieving a primary budget surplus by the next fiscal year, amid concerns over escalating government debt in a low-interest rate environment.
Federal Reserve Bank of Minneapolis President Neel Kashkari noted expectations for a gradual return of inflation to the 2% target over the next one to two years.
Technical Analysis and Market Outlook
USD/JPY traded near 159.70, displaying a bullish bias on the daily chart within an ascending channel pattern. The 14-day RSI above 50 indicates upward momentum, with resistance at 160.32. Support lies at the nine-day EMA around 158.42, potentially leading to further downside toward 155.60 if breached.
In summary, while the JPY holds steady amidst intervention signals, the USD faces yield-driven challenges despite positive economic data, shaping market dynamics amid ongoing global economic uncertainties.
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