Japanese Yen inches higher due to verbal intervention by Japanese authorities

• The Japanese Yen holds ground, possibly due to verbal intervention by Japanese authorities.
• Japan’s Masato Kanda said he would intervene around the clock if necessary.
• The US Dollar edges higher as Fed officials keep delaying the timing of the first interest rate cut in 2024.

The Japanese Yen (JPY) holds its position, possibly due to verbal intervention by the Japanese authorities. Japan’s top currency diplomat, Masato Kanda, stated on Monday that he would take appropriate measures if there were excessive movements in the foreign exchange market. Kanda cautioned against the negative economic effects of such movements and emphasized his readiness to intervene around the clock if necessary, per Reuters.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, edged lower due to the decline in the yields on US Treasury bonds. However, the downside of the US Dollar (USD) may limit itself as the higher-than-expected US Purchasing Managers Index (PMI) from Friday boosted the speculation of delaying the expected timing of the first interest rate cut this year. According to the CME FedWatch Tool, investors are pricing in nearly 65.9% odds of a Fed rate cut in September, compared to 70.2% a week earlier.

Daily Digest Market Movers: Japanese Yen declines due to the hawkish Fed

• BoJ’s Summary of Opinions from its June monetary policy meeting noted that underlying inflation, measured by the consumer price index (CPI), is expected to increase gradually. In the second half of the projection period, it is likely to be at a level that is generally consistent with the price stability target.
• On Friday, the US Composite PMI for June surpassed expectations, rising to 54.6 from May’s reading of 54.5. This figure marked the highest level since April 2022. The Manufacturing PMI increased to a reading of 51.7 from a 51.3 figure, exceeding 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 stated on Friday that the central bank would “adjust the degree of monetary support” if the economy and prices align with its forecasts. This signals the bank’s readiness to raise interest rates further.
• Japan reaffirmed its commitment on Friday to achieve a primary budget surplus by the next fiscal year. This decision reflects concerns that exiting the ultra-low interest rate environment could increase the government’s debt burden, according to Reuters.
• As per a Reuters report, Federal Reserve Bank of Minneapolis President Neel Kashkari 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. Analyzing the daily chart shows a bullish bias, with the pair testing the upper boundary of an ascending channel pattern. Moreover, the 14-day Relative Strength Index (RSI) is above the 50 level, suggesting a tendency for upward momentum.

The surpassing of the upper threshold of the ascending channel pattern will reinforce the bullish sentiment and lead the pair to approach the level of 160.32, marked in April as the highest level in over thirty years, which represents a major resistance.

On the downside, the 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 driving it toward the lower boundary of the ascending channel around the level of 155.60. A break below this level could exert pressure on the pair to test the throwback 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 the Japanese authorities” in the first paragraph, not just intervention.)