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USD/JPY consolidates around YTD peak, flat-lines below 145.00 ahead of US PCE Price Index

  • USD/JPY eases after hitting a fresh YTD high, though the downside remains cushioned.
  • The BoJ-Fed policy divergence is seen as a key factor that continues to act as a tailwind.
  • Intervention fears hold back bulls from placing fresh bets ahead of the US PCE Price Index.

The USD/JPY pair finds some support near the 144.45 area and stalls its intraday retracement slide from its highest level since November 2022 touched this Friday. Spot prices currently trade around 144.55-144.60 region, nearly unchanged for the day, and seems poised to prolong its recent well-established uptrend witnessed over the past three weeks or so.

An intraday uptick beyond the 145.00 psychological mark fueled speculations about a potential intervention by Japanese authorities and turns out to be a key factor that forced investors to lighten their bullish bets around the USD/JPY pair. Moreover, Japan's Finance Minister Shunichi Suzuki said that the government will take appropriate steps should the Japanese Yen (JPY) weaken excessively. This, along with the prevalent cautious market mood, lends some support to the JPY and acts as a headwind for the major.

Investors' remain worried  about economic headwinds stemming from rapidly rising borrowing costs and the concerns were further fueled by rather unimpressive Chinese macro data.  In fact, the official Chinese Manufacturing PMI improved slightly to 49 for June, from 48.8 previous, though remained in contraction territory for the third straight month. Meanwhile, the gauge for the services sector surpassed consensus estimates and came in at 53.2 for the reported month, though was lower than the 54.5 recorded in May.

Apart from this, subdued US Dollar (USD) price action keeps a lid on the USD/JPY pair, though any meaningful corrective slide remains elusive in the wake of the dovish stance adopted by the Bank of Japan (BoJ). In fact, market participants seem convinced that BoJ's negative interest-rate policy will remain in place at least until next year. Moreover, BoJ Governor Kazuo Ueda recently ruled out the possibility of any change in ultra-loose policy settings and signalled no immediate plans to alter the yield curve control measures.

This marks a big divergence in comparion to the Federal Reserve's (Fed) hawkish outlook, siganlling that borrowing costs may still need to rise as much as 50 bps by the end of this year. Adding to this, Thursday's upbeat US macro data all but cemented beets for a 25 bps rate hike at the July FOMC meeting. This, in turn, pushes the US Treasury bond yields higher, which favours the USD bulls and supports prospects for additional gains for the USD/JPY pair. Traders, however, seem reluctant ahead of the release of the US PCE Price Index.

The Fed's preferred inflation gauge - the Core PCE - will play a key role in influencing market expectations about the future rate-hike path. This, in turn, should help investors to determine the near-term trajectory for the Greenback and provide some meaningful impetus to the USD/JPY pair later during the early North American session. Nevertheless, spot prices remain on track to register gains for the third straight week. Moreover, the aforementioned fundamental backdrop suggests that the path least resistance is to the upside.

Technical levels to watch

USD/JPY

Overview
Today last price144.71
Today Daily Change-0.04
Today Daily Change %-0.03
Today daily open144.75
 
Trends
Daily SMA20141.43
Daily SMA50138.6
Daily SMA100136.14
Daily SMA200137.23
 
Levels
Previous Daily High144.9
Previous Daily Low144.14
Previous Weekly High143.87
Previous Weekly Low141.21
Previous Monthly High140.93
Previous Monthly Low133.5
Daily Fibonacci 38.2%144.61
Daily Fibonacci 61.8%144.43
Daily Pivot Point S1144.29
Daily Pivot Point S2143.83
Daily Pivot Point S3143.52
Daily Pivot Point R1145.06
Daily Pivot Point R2145.36
Daily Pivot Point R3145.82

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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