Japanese yen inches higher due to verbal interference from Japanese authorities

• The Japanese yen holds ground, perhaps due to the verbal intervention of the Japanese authorities.
• Japan’s Masato Kanda said he would intervene at all times if necessary.
• The US dollar surges higher as Fed officials continue to delay the timing of the first interest rate cut in 2024.

The Japanese Yen (JPY) is holding its ground, possibly due to the verbal intervention of the Japanese authorities. Japan’s chief currency diplomat, Masato Kanda, said on Monday that he would take appropriate measures if there were excessive movements in the foreign exchange market. Kanda warned against the negative economic effects of such moves and stressed his readiness to intervene at any time if necessary, according to Reuters.

The US dollar index (DXY), which measures the value of the US dollar (USD) against six major currencies, edged lower as US Treasury yields fell. However, the decline in the US dollar (USD) may limit itself as a higher-than-expected US Purchasing Managers’ Index (PMI) from Friday fueled speculation of a delay in the expected timing of the first interest rate cut this year. year. According to the CME FedWatch Tool, investors are pricing in a nearly 65.9% chance of a Fed rate cut in September, compared with 70.2% a week ago.

Daily Summary Market Movers: Japanese Yen Falls on Fed Dovish

• The BoJ’s summary of views from its monetary policy meeting in June noted that core inflation, as measured by the consumer price index (CPI), is expected to rise gradually. In the second half of the projection period, it is likely to be at a level that is generally consistent with the objective of price stability.
• On Friday, the US composite PMI for June beat expectations, rising to 54.6 from May’s reading of 54.5. The figure marked the highest level since April 2022. The manufacturing PMI rose to a reading of 51.7 from a reading of 51.3, beating the forecast of 51.0. Similarly, the Services PMI rose to 55.1 from 54.8 in May, beating the consensus estimate of 53.7.
• Reuters reported that Bank of Japan Deputy Governor Shinichi Uchida said on Friday that the central bank would “adjust the rate of monetary support” if the economy and prices match its forecasts. This signals the bank’s willingness to further increase interest rates.
• Japan reaffirmed its commitment on Friday to achieve a primary budget surplus by the next fiscal year. The decision reflects concerns that exiting the low-interest rate environment could increase the government’s debt burden, according to Reuters.
• According to a Reuters report, Federal Reserve Bank of Minneapolis President Neel Kashari noted that it will probably take a year or two to get inflation back to 2%.

Technical Analysis: USD/JPY remains above 159.50

USD/JPY trades around 159.70 on Monday. Analysis of the daily chart shows a bullish bias, with the pair testing the upper boundary of an ascending channel pattern. Additionally, the 14-day Relative Strength Index (RSI) is above the 50 level, suggesting a bullish trend.

Crossing the upper threshold of the rising channel pattern will reinforce the bullish sentiment and take the pair closer to the 160.32 level, marked in April as the highest level in over thirty years, which represents a major resistance.

On the downside, immediate support appears at the nine-day exponential moving average (EMA) at 158.42. A breach below this level could intensify downward pressure on the USD/JPY pair, potentially pushing it towards the lower boundary of the ascending channel around the 155.60 level. A break below this level could put pressure on the pair to test the rebound support around the 152.80 level.

USD/JPY: Daily Chart

(This story was corrected on June 24 at 03:40 GMT to say “verbal intervention by Japanese authorities” in the first paragraph, not just intervention.)