Wed, July 24, 2024

USD/JPY at 159.70 Amid Key Economic Shifts

Wibest – Japan Yen: Japanese yen bills. USD/JPY

Quick Look:

  • Exchange Rate Levels: USD/JPY stands at 159.70, with key resistance at 160.32 and support at 158.42 and 155.60.
  • Japanese Economic Policy: BOJ ends negative interest rate policy; possible intervention if the rate hits 160.00.
  • US Economic Indicators: Robust PMI readings; Composite PMI hits 54.6, the highest since April 2022.

The USD/JPY exchange rate currently stands at 159.70, exhibiting significant movements influenced by various technical and economic factors. Let’s delve into the key levels and indicators shaping this currency pair’s trajectory.

Technical Levels and Indicators

The USD/JPY navigates within an ascending channel, with the upper boundary at 160.32. This level serves as a crucial resistance point. On the downside, immediate support is observed at 158.42, followed by the channel’s lower boundary at 155.60. In case of a more significant retracement, throwback support is positioned at 152.80.

A noteworthy technical indicator, the 14-day Relative Strength Index (RSI), is above 50, signaling sustained upward momentum for the pair.

BOJ Interventions Likely at USD/JPY 160.00

Japanese officials last intervened in April when the exchange rate hit 160.00, a level at which intervention is again likely if reached. This proactive stance highlights the ongoing vigilance of Japanese authorities in stabilizing their currency. The Bank of Japan (BOJ) has recently ended its negative interest rate policy, a significant shift reflecting easing inflation pressures. The June summary of opinions from the BOJ suggests a gradual increase in the Consumer Price Index (CPI), aligning with broader economic forecasts.

Market Sentiments: BOJ and US Fed Officials’ Statements

Masato Kanda, a notable Japanese official, has strongly committed to intervening in the currency markets as necessary. His comments underscore the readiness to act decisively to mitigate any adverse economic impacts. Meanwhile, Shinichi Uchida of the BOJ has indicated potential adjustments to monetary support if economic conditions and price levels align with projections. Across the Pacific, Neel Kashkari of the US Federal Reserve has suggested that bringing inflation back to the 2% target could take up to two years.

Market Movements: Yen Appreciation and Dollar Strength

Recent verbal interventions by Japanese authorities have caused a slight appreciation in the Japanese Yen. Conversely, the US Dollar has increased, primarily due to the delayed timing of the anticipated first interest rate cut in 2024. However, the US Dollar Index saw a marginal decline, influenced by a drop in US Treasury bond yields. This downside was limited by stronger-than-expected Purchasing Managers’ Index (PMI) readings.

USD/JPY Key Indicators: US PMI Surpasses Forecasts

The BOJ‘s potential interest rate adjustment remains a key focus, contingent on the alignment of economic forecasts with actual performance. Japan remains committed to achieving a primary budget surplus by the next fiscal year, highlighting its fiscal discipline. In the United States, economic indicators have shown robust performance. The Composite PMI for June exceeded expectations, reaching its highest level since April 2022 at 54.6. The Manufacturing PMI rose to 51.7, surpassing the forecast of 51.0, while the Services PMI increased to 55.1, beating the anticipated 53.7.

Speculation regarding a rate cut by the Federal Reserve has seen a slight shift, with the odds for a September cut dropping to 65.9%, down from 70.2% the previous week.

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