The Japanese Yen (JPY) continued its decline against the US Dollar (USD) for the second consecutive day, driven by remarks from Bank of Japan (BoJ) Deputy Governor Shinichi Uchida. Uchida emphasized on Wednesday that the BoJ would refrain from raising rates during periods of market instability, a statement that contributed to market sentiment favoring the USD.
Uchida further stated that the BoJ’s interest rate strategy remains adaptable to changes in market volatility, which could impact economic forecasts and risk assessments. Given recent market turbulence, he underscored the importance of closely monitoring the economic and price effects of current policies, advocating for the maintenance of current monetary easing measures.
Meanwhile, the USD faces challenges amidst expectations of a significant rate cut by the US Federal Reserve (Fed) in September. According to the CME FedWatch tool, there is now a 67.5% probability of a 50-basis point interest rate reduction, a stark increase from the 13.2% probability observed just a week ago.
In other economic news from Japan, Chief Cabinet Secretary Yoshimasa Hayashi indicated optimism regarding wage increases, expected to extend to part-time workers and small businesses by autumn. This outlook follows a robust increase of 4.5% year-on-year in Japan’s Labor Cash Earnings for June, the highest since January 1997, signaling a shift towards a rising interest rate environment.
Looking ahead, technical analysis of the USD/JPY pair suggests a potential rebound as it approaches the nine-day Exponential Moving Average (EMA) level. The 14-day Relative Strength Index (RSI) indicates oversold conditions, potentially setting the stage for a short-term recovery.
Support for the USD/JPY pair is anticipated around the 140.25 level, with resistance likely at the nine-day EMA near 149.22. A breakout above this resistance could mitigate bearish pressures and pave the way for further gains.
The recent developments underscore the interplay between central bank policies and market dynamics, influencing currency movements in the ongoing economic landscape.
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