- The Japanese yen falls as the US dollar improves on the botched assassination of former US President Donald Trump.
- JPY may experience volatility amid speculation of possible intervention by Japanese authorities.
- Japanese authorities are estimated to have spent between ¥3.37 trillion and ¥3.57 trillion to stem the JPY’s rapid depreciation.
The Japanese yen (JPY) edged lower on Monday as the US dollar (USD) strengthened amid increased risk aversion sparked by the assassination attempt on former US President Donald Trump on Saturday. Analysts speculate that if the event boosts Trump’s chances in the next election, it could fuel ‘Trump victory trades’, potentially strengthening the US dollar and deepening the US Treasury yield curve, according to a Reuters report.
The Japanese Yen (JPY) could face potential volatility amid speculation of intervention by the Japanese authorities. According to data released by the Bank of Japan (BoJ) on Friday, it is estimated that Japanese authorities may have spent between ¥3.37 trillion and ¥3.57 trillion on Thursday to stem the rapid depreciation of the JPY, as reported by Reuters.
The rise in the Japanese yen, which had hovered near 38-year lows, began on Thursday as the US dollar (USD) weakened after data showing a moderation in US consumer prices for June. This development has raised expectations that the Federal Reserve may cut interest rates as early as September.
According to CME Group’s FedWatch Tool, markets now point to an 88.1% probability of a 25-basis-point rate cut at the Fed’s September meeting, up from 72.2% a week ago.
Daily Summary Market Movers: Japanese Yen May Experience Volatility on Intervention Threats
- ING FX analyst Francesco Pesole notes that Japan’s Finance Ministry has adjusted its FX intervention strategy. After the mild US CPI print on Friday, the USD/JPY pair fell roughly 2%, a bigger decline compared to other USD pairs. The increase in JPY futures volumes appears to be consistent with indications of FX intervention.
- UBS FX strategists note that speculative investors are holding near-record short positions in the yen. They suggest that if US economic data continues to show a soft decline, USD/JPY could experience periods of pullback.
- BBH FX strategists point out that the recent softness in US data challenges their outlook that the backdrop of steady inflation and strong US growth remains largely intact. They point to growing concern among Federal Reserve officials about weaknesses in the labor market.
- Japanese Chief Cabinet Secretary Yoshimasa Hayashi declared his readiness to use all available measures regarding Forex. Hayashi noted that the Bank of Japan (BoJ) will determine the specifics of monetary policy. He expects the BoJ to implement appropriate measures to achieve the 2% price target in a sustainable and sustainable manner, Reuters reported on Friday.
- On Friday, Japanese Finance Minister Shunichi Suzuki stressed that rapid foreign exchange (FX) movements are undesirable. Suzuki did not comment on the FX intervention and declined to address media reports about Japan’s FX rate controls, as reported by Reuters.
- On Thursday, data showed that the U.S. Core Consumer Price Index (CPI), which excludes volatile food and energy prices, rose 3.3% year-on-year in June, compared with May’s rise of 3.4%. and the same expectation. Meanwhile, the core CPI rose 0.1% month-on-month, versus the expected and previous reading of 0.2%.
- Federal Reserve Chairman Jerome Powell emphasized the urgent need to monitor the deterioration of the labor market on Wednesday. Also, Powell expressed confidence in the downward trend of inflation, following his statements on Tuesday that emphasized the need for further data to strengthen confidence in the inflation outlook.
Technical Analysis: USD/JPY holds the position around 158.00
USD/JPY trades around 158.00 on Monday. Daily chart analysis shows a weakening uptrend as the pair has broken below the lower boundary of an ascending channel pattern. Additionally, the 14-day Relative Strength Index (RSI) is below the 50 level, signaling bearish momentum for the pair.
Further downward movement could put downward pressure on USD/JPY, potentially testing support near the June low at 154.55.
On the upside, immediate resistance is seen around the 14-day exponential moving average (EMA) at 159.75, followed by the lower boundary of the ascending channel around 160.20. A return to trading within the ascending channel is likely to improve sentiment for the USD/JPY pair, with a possible target towards the upper boundary of the ascending channel near 163.50.
USD/JPY: Daily Chart
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The table below shows the percentage change of the Japanese Yen (JPY) against the major currencies listed today. The Japanese yen was the weakest against the British pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | 0.03% | -0.16% | 0.06% | 0.05% | 0.23% | 0.04% | |
| EUR | -0.09% | -0.03% | -0.07% | 0.14% | -0.00% | 0.33% | 0.13% | |
| GBP | -0.03% | 0.03% | 0.06% | 0.17% | 0.02% | 0.31% | 0.16% | |
| JPY | 0.16% | 0.07% | -0.06% | 0.20% | -0.02% | 0.35% | -0.00% | |
| CAD | -0.06% | -0.14% | -0.17% | -0.20% | -0.06% | 0.19% | -0.02% | |
| AUD | -0.05% | 0.00% | -0.02% | 0.02% | 0.06% | 0.33% | 0.14% | |
| NZD | -0.23% | -0.33% | -0.31% | -0.35% | -0.19% | -0.33% | -0.20% | |
| CHF | -0.04% | -0.13% | -0.16% | 0.00% | 0.02% | -0.14% | 0.20% |
The heat map shows the percentage changes of major currencies against each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select Japanese Yen from the left column and scroll along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).