CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

• USD/JPY continues to grind higher as markets eat away at “Yentervention” declines.
• US inflation figures to dominate the trading week.
• Markets still hope for two rate cuts in 2024 despite inflation outlook.

USD/JPY broke above the 156.00 handle on Monday as markets continue to chew through Japanese Yen (JPY) gains following a pair of suspected “Yenterventions” from the Bank of Japan (BoJ) at the end of April and beginning of May. The BoJ has remained tight-lipped on the matter, refusing to officially confirm or deny direct intervention in global markets on behalf of the Yen. Still, BoJ financial operations reported overspending on forecast expenditures by around nine billion Yen the same week the JPY recovered 4.5% against the US Dollar (USD).

Markets will be focusing squarely on US inflation figures due this week,though Japanese Gross Domestic Product data is due early Thursday. Markets are broadly expecting Japanese GDP growth to contract, forecast to print at -0.4% in Q1 compared to the previous quarter’s 0.1%. 

US Producer Price Index (PPI) inflation is slated for Tuesday, with Core PPI inflation expected to hold steady at 2.4% YoY in April. Wednesday’s US Consumer Price Index (CPI) inflation is expected to hold steady at 0.4% MoM in April, with YoY headline CPI inflation expected to tick down to 3.4% from 3.5%.

Despite a recent parade of policymakers from the Federal Reserve (Fed) voicing caution about markets hoping for rate cuts at a faster pace and sooner than the Fed can achieve, market hopes are still pinned firmly on two Fed cuts in 2024, with the first broadly expected to come in September. According to the CME’s FedWatch Tool, rate markets are pricing in nearly 90% odds of a rate cut in 2024, with 65% odds of a 25-basis-point cut in at the Fed’s September rate meeting.

USD/JPY technical outlook

USD/JPY has been slow to recover ground, but progress has been notably one-sided as the pair drifts higher, climbing over the 200-hour Exponential Moving Average (EMA) near 155.36. The pair is testing into chart territory north of the 156.00 handle, and is up nearly 3% from the last post-Yentervention bottom below 152.00.

USD/JPY is on pace to close in the green for a fifth out of the last six trading days after a sharp decline from multi-year highs above 160.00. The long-term bullish uptrend remains firmly intact, with bids trading well above the 200-day EMA at 148.29.

USD/JPY hourly chart

USD/JPY daily chart

• USD/JPY remains firm around 155.85 in Monday’s Asian session.
• The BoJ reduced the amount of JGBs that it purchased in its latest operation.
• A cautious approach from the US Fed boosts the Greenback broadly.

The USD/JPY pair trades on a stronger note near 155.85 during the Asian trading hours on Monday. The hawkish stance from the US Federal Reserve (Fed) has provided some support to the Greenback in recent sessions. Investors will take more cues from the US Consumer Price Index (CPI), Producer, Price Index (PPI), and Retail Sales this week for fresh impetus. Also, Fed Jefferson and Mester are set to speak later on Monday.

Early Monday, the Bank of Japan (BoJ) reduced the amount of Japanese Government Bonds (JGBs) that it purchased in its latest operation in the 5–10-year window to 425bn Yen from 475bn Yen at the previous operation. Ruling party heavyweight Katsunobu Kato said that Japan is seeing conditions fall in place for the central bank to normalize monetary policy. However, the BoJ must monitor economic conditions and coordinate carefully with the government in working out when to raise rates.

The Fed officials delivered a cautious message last week. Financial markets have priced in 5% odds of a June rate cut, down from 10% at the start of last week, while September chances have fallen to 75% from nearly 90% at the beginning of last week. The preliminary University of Michigan Consumer Sentiment Index arrived at 67.4 in May from 77.2 in April, worse than the estimation of 76.0. Furthermore, the one-year inflation outlook climbed to 3.5%, and the five-year outlook rose to 3.1%, the highest level since November 2023. The wide interest rate differential between Japan and the United States continues to undermine the Japanese Yen (JPY) and create a tailwind for the USD/JPY pair.

• USD/JPY climbs after worse-than-expected US consumer sentiment data.
• Recession fears reignited as Americans became less optimistic about the economy.
• A jump in US inflation expectations underpins US yields and the Greenback.

The USD/JPY advanced steadily during the North American session, following a worse-than-expected University of Michigan (UoM) poll that showed that American consumers are becoming pessimistic about the economy. Despite that, the major trades at 155.83, up 0.24%.

USD/JPY rises after UoM Consumer Sentiment survey, eyes on next week US inflation

The UoM Consumer Sentiment Index retreated in May from 77.2 in April to 67.4, missing analysts’ estimates of 76. According to Joanne Hsu, the Director of the UoM Survey, the 10-point decline “is statistically significant and brings sentiment to its lowest reading in about six months.” According to the survey, Americans are becoming concerned about inflation, unemployment, and interest rates.

Inflation expectations for one year rose from 3.2% to 3.5% in May and stood at 3.1%, a tenth up from 3.0% for a ten-year period.

The US 10-year Treasury note yield rose four basis points (bps) to 4.498% following the data release. The US Dollar Index (DXY) has also advanced 0.14%, up to 105.35, as recession fears reignited, as the UoM survey suggests consumer spending could weaken in the near term.

In the meantime, two Federal Reserve officials had crossed the newswires. Fed Governor Michelle Bowman commented that the US central bank should proceed “carefully and deliberately.” Her colleague, the Dallas Fed Lorie Logan, said it's too early to think about cutting rates.

Next week, the US docket will feature the release of inflation figures, retail sales, building permits, and Fed speeches.

USD/JPY Price Analysis: Technical outlook

From a technical standpoint, the USD/JPY rally is set to continue, as momentum is on the side of buyers, as depicted by the Relative Strength Index (RSI). That, along with prices standing above the Ichimoku Cloud, could pave the way for bulls to challenge 156.00 in the near term.  On the other hand, a drop below the Kijun-Sen at 155.78 could pave the way to challenge the Senkou Span A at 155.22, followed by the Tenkan Sen at 154.92.

• USD/JPY gained ground due to the recovery in the US Dollar on Friday.
• Japan’s Current Account Surplus was lower than market expectations, weakening the Japanese Yen.
• US Initial Jobless Claims rose to an eight-month high of 231K, surpassing estimates of 210K.

USD/JPY is retracing its recent losses from the previous session, trading around 155.70 during the European session on Friday. However, verbal intervention from Japanese authorities is expected to curb the upward movement of the USD/JPY pair. Japanese Finance Minister Shunichi Suzuki reiterated on Friday that he is prepared to take necessary measures concerning foreign exchange if deemed necessary.

On the data front, Japan’s Current Account Surplus (YoY) rose to JPY 3,398.8 billion in March from JPY 2,360.0 billion. This marked the 14th consecutive month of surplus in the current account but fell short of the expected increase of JPY 3,489.6 billion. The data showed that capital inflows into Japan were lower than market expectations, weakening the Japanese Yen.

The USD/JPY pair received support from the upward correction in the US Dollar (USD), driven by the hawkish sentiment surrounding the Federal Reserve (Fed) maintaining higher interest rates for an extended period.

However, the Greenback encounters resistance due to lower US Treasury yields, influenced by the lower-than-expected US Initial Jobless Claims data released on Thursday. The US Bureau of Labor Statistics (BLS) reported that the number of individuals filing for unemployment benefits exceeded expectations, with Initial Jobless Claims for the week ending May 3 rising to 231,000, surpassing estimates of 210,000 and increasing from the previous week's reading of 209,000.

Later in the day, the preliminary US Michigan Consumer Sentiment Index for May is scheduled for release, with forecasts indicating a slight decrease. This survey assesses sentiment among US consumers, covering three primary areas: personal finances, business conditions, and buying conditions.

• USD/JPY edges higher to 155.50 in Friday’s early Asian session. 
• Fed’s Collins becomes the latest Fed official to warn rates will likely stay higher for longer. 
• The BoJ’s recent hawkish comments and FX intervention considerations support the Japanese Yen. 

The USD/JPY pair trades on a stronger note around 155.50 on Friday during the early Asian trading hours. The renewed US Dollar (USD) demand lifts the pair. Nonetheless, the verbal intervention and the hawkish comment from the Bank of Japan’s (BOJ) Governor Kazuo Ueda might cap the downside of the Japanese Yen (JPY) for the time being. 

On Thursday, San Francisco Fed President Mary Daly stated that the central bank may take more time to return inflation to its target as the uncertainty about inflation in the next few months has increased. Other Fed officials this week have also shown they favor keeping rates at their current levels for longer. This, in turn, might lift the Greenback and create a tailwind for USD/JPY. 

Financial markets anticipate the US central bank to keep policy on hold for the rest of the year as it looks for "greater confidence" in inflation, and Fed’s Chair Jerome Powell emphasized that it might take longer than expected to achieve that confidence.” 

On the other hand, BoJ Governor Kazuo Ueda said on Thursday that the central bank will scrutinize the JPY's recent weakness in guiding monetary policy, per Reuters. The hawkish comments have prompted the expectation of an increase in short-term borrowing costs in the coming months, which provide some support to the JPY and drag the USD/JPY lower. 

Additionally, the verbal intervention from Japanese authorities is likely to limit the pair’s upside in the near term. Early Friday, Japanese Finance Minister Shunichi Suzuki said once again that he will take necessary measures regarding foreign exchange if required.

• USD/JPY pushes relentlessly higher as market forces overcome intervention attempts. 
• The US Dollar is strengthening across the board as interest rates in the US diverge from the global trend. 
• Weak Japanese wage data puts a dent in BoJ plan to hike interest rates to prop up the Yen. 

USD/JPY is trading up two-tenths of a percent in the 155.80s on Thursday as the US Dollar (USD) continues its recovery rally from the May 3 lows. 

The strength of the Dollar is broad-based although USD/JPY is rising faster than the US Dollar Index (DXY) – perhaps because the Japanese Yen (JPY) is depreciating more than most currencies following the release of weak wage data from Japan.

A lack of inflationary pressures in Japan mean the Bank of Japan (BoJ) cannot raise interest rates to support the Yen and this combined with the outlook for higher interest rates in the US due to strong economic activity, suggest a bullish outlook for USD/JPY. 

Everything is relative 

The most recent comments from Federal Reserve (Fed) officials suggest they are in favor of keeping interest rates higher for longer due to stubbornly high inflation. This is one of the factors supporting the Greenback, as higher interest rates strengthen a currency because they generate greater foreign capital inflows. 

Another factor supporting the USD is the divergence that the Fed’s stance opens up with other major central banks.  

“The relative story continues to push the (US) Dollar higher. Given the absence of any topline US economic data, we chalk these gains up to developments in the rest of the world. With FX, it’s always about the relative story and here, other central banks have so far shown an unwillingness to be as hawkish as the Fed. First, the RBA delivered a neutral hold.  Then, the Riksbank delivered a 25 bps cut, becoming the second major central bank to cut rates (after Switzerland).  Who’s next?” Says Brown Brothers Harriman in a note on Thursday. 

Since this was written, the Bank of England (BoE) has reported a dovish hold, with two board members dissenting – up from one last time – and voting for a rate cut instead. The decision sent GBP/USD lower and the Pound Sterling (GBP) depreciated against the USD. 

US growth is sound

The expectation the Fed will need to keep interest rates higher for longer is backed not just by “jawboning” but by a relatively strong outlook for US growth. 

US economic growth in Q2 remains robust according to various nowcasting models that give real time estimates for growth. 

“The Atlanta Fed’s GDPNow model is tracking Q2 growth at 4.2% SAAR and will be updated next Wednesday after the data. Elsewhere, the New York Fed’s Nowcast model is tracking Q2 growth at 2.2% SAAR and will be updated tomorrow,” says BBH. 

The models suggest continued inflationary pressures from economic activity which will further delay the decision to cut interest rates, keeping demand robust for USD. 

Japanese Yen hampered by weak data  

USD/JPY’s bullish outlook is further encouraged by a debilitated JPY which remains handicapped by poor data.

Japan nominal Cash Earnings data in March came out well below estimates at 0.6% year-over-year (vs.1.4% forecast) and below the previous month’s 1.5%. Real Cash Earnings, meanwhile, fell 2.5% YoY when a drop of 1.4% had been expected and a fall of 1.8% was registered in February. 

The data was the weakest reading for real Cash Earnings since November and suggests very little in the way of wage pressures. 

Given the BoJ’s focus on trying to raise wages to escape the deflation spiral the data suggests, “the BOJ’s tightening process will be gradual,” according to BBH. 

“..we doubt the BOJ will tighten more than is currently priced-in (30bps of hikes in 2024). First, underlying inflation in Japan is in a firm downtrend..” Says BBH. 

As many analysts have already pointed out, unless the Japanese authorities can combine direct intervention to prop up the Yen with interest rate hikes they do not have the firepower to beat market forces and USD/JPY will continue to rise. 

As such, Bank of Japan’s Governor Kazuo Ueda’s recent warnings that a policy response might be needed if foreign exchange rates affect the inflation trend, seem like a hollow threat because he does not have the data behind him to back up his words with actions. 

• USD/JPY could test the psychological level of 156.00 followed by the upper boundary of the ascending channel.
• The bullish trend would be confirmed if the MACD line crosses over the signal line.
• The 14-day EMA at 154.89 appears as the immediate support.

USD/JPY continues its winning streak for the fourth successive session, trading around 155.80 during the Asian hours on Thursday. The pair is consolidating within the ascending channel, with the 14-day Relative Strength Index (RSI) positioned above the 50-level, indicating a bullish bias.

Additionally, the momentum indicator Moving Average Convergence Divergence (MACD) line is positioned above the centerline and shows convergence below the signal line. If the MACD line crosses over the signal line, suggest a signal to buy as confirmation of a bullish trend.

The USD/JPY pair could find resistance around the psychological level of 156.00. A break above this level could lead the pair to test the upper boundary of the ascending channel around the level of 159.70.

On the downside, the 14-day Exponential Moving Average (EMA) at 154.89 appears as the immediate support, followed by the lower boundary of the ascending channel around the psychological level of 154.00. A break below this level could lead the pair to retest May’s low at 151.86 recorded on May 3.

USD/JPY: Daily Chart

• USD/JPY gains ground near 155.60 amid a modest rebound of USD on Thursday. 
• Many Japanese policymakers called for for steady interest rate to avoid the risks of inflation overshoot.
• Fed’s Collins emphasised the need to hold rates higher for longer to curb inflation, boosting the USD. 

The USD/JPY pair trades in positive territory for the fourth consecutive day around 155.60 during the early Asian trading hours on Thursday. However, the fear of further intervention from the Bank of Japan (BoJ) is likely to cap the downside of the Japanese Yen (JPY) for the time being. 

The BoJ board members decided to hold the key interest rate steady at 0% at its April monetary policy meeting. According to the Bank of Japan (BoJ) Summary of Opinions, board members turned hawkish at their April policy meeting, with many policymakers calling for a steady interest rate to avoid the risks of inflation overshoot. The statement highlighted BoJ Governor Kazuo Ueda's recent comments indicating the prospect of multiple rate rises in the coming months, as well as the possibility of an increase in short-term borrowing rates.

Early Wednesday, Japan's top currency diplomat, Masato Kanda, came with a verbal intervention, saying that he would take appropriate action if it’s necessary to prevent the JPY. Nonetheless, Kanda declined to comment on the FX intervention. The possibility of further steps from the Japanese authorities to prevent its currency might boost the JPY and cap the pair’s upside. 

On the other hand, the monetary policy gap between the United States and Japan continues to support USD/JPY. Meanwhile, Boston Fed President Susan Collins stated on Wednesday that the interest rate will likely stay higher for longer, as it will take longer than previously thought to bring inflation down to target. The hawkish remarks from Fed officials lift the Greenback and act as a tailwind for the pair. Apart from this, traders will monitor the preliminary University of Michigan Consumer Sentiment Index on Friday, which is expected to drop to 76.0 in May from 77.2 in April. 

• USD/JPY found further gains as Yen recedes post-”Yentervention”.
• US consumer sentiment survey results due on Friday.
• BoJ remains tight-lipped on FX market interventions.

USD/JPY drifted higher on Wednesday, marking in a third straight day of easy gains as the pair pares away recent losses from two suspected “Yenterventions” by the Bank of Japan (BoJ). The Yen has battled back from multi-decade lows, but progress is limited as the JPY resumes deflating across the board.

The US economic data docket is fairly light this week, with only mid-tier data on the offering until Friday’s University of Michigan Consumer Sentiment Index. The UoM’s indexed survey of consumer economic expectations for May is expected to tick down to 76.0 MoM compared to the previous month’s 77.2. The UoM Consumer Sentiment Survey hit a two-and-a-half year high of 79.4 in March.

The BoJ has gone to great lengths to neither confirm nor deny that the Japanese central bank undertook two separate currency interventions on behalf of the Japanese Yen (JPY) last week, but market participants noted that BoJ market operation reporting wildly overshot estimates, with the BoJ overspending on miscellaneous financing operations by around nine billion Yen in the first half of last week.

The economic calendar remains relatively thin for the rest of the week, and USD/JPY traders will be looking ahead to a fresh round of inflation figures from the US next week, as well as Japan’s latest Gross Domestic Product (GDP) growth figures due early next Thursday.

USD/JPY technical outlook

USD/JPY has climbed back over the 200-hour Exponential Moving Average (EMA) at 155.04 in the mid-week market session, ticking into a fresh high near 155.70 and set for a run at the 156.00 handle. The pair has risen around 2.5% unimpeded from last week’s swing low below 152.00.

USD/JPY closed on a third consecutive trading day in the green on Wednesday, and despite possible “Yenterventions”, the pair found technical support from the 50-day EMA at 152.72 and continues to trade well into bull country. The pair is up over 10% for the year.

USD/JPY hourly chart

USD/JPY daily chart

• USD/JPY extends winning streak amid hawkish sentiment surrounding the Fed’s stance on monetary policy.
• Fed's Kashkari anticipates the prolonging of elevated rates and suggests that further rate hikes are not entirely ruled out.
• The Japanese Yen depreciated despite the potential for intervention by Japanese authorities.

USD/JPY trades around 155.30 during the early European session on Wednesday, marking a third consecutive day of gains. The US Dollar (USD) gained ground due to the possibility of the Federal Reserve's (Fed) prolonging higher interest rates. Furthermore, hawkish remarks from Minneapolis Fed President Neel Kashkari have strengthened the Greenback, thereby underpinning the USD/JPY pair.

As reported by Reuters on Tuesday, President Kashkari's remarks, imply an anticipation of unchanged interest rates for a considerable period. While the likelihood of rate hikes is low, they are not entirely discounted.

According to Bloomberg, Richmond Federal Reserve (Fed) President Thomas Barkin remarked on Monday that elevated interest rates could likely restrain economic growth in the United States (US). However, higher interest rates can help alleviate inflationary pressures, bringing them closer to the central bank's 2% target.

Last week, the Japanese Yen (JPY) saw appreciation amid speculations of potential intervention by Japanese authorities. Reuters reported data from the Bank of Japan (BoJ) suggesting that Japanese authorities may have allocated approximately ¥6.0 trillion on April 29 and ¥3.66 trillion on May 1 to support the JPY. However, these interventions could only provide temporary relief, given the significant interest rate differentials between Japan and the United States (US).

Despite continued warnings from Japanese authorities against extreme currency movements, the Japanese Yen depreciated. Finance Minister Shunich Suzuki reiterated the warning that authorities are prepared to respond to excessive foreign exchange volatility, while Bank of Japan (BoJ) Governor Kazuo Ueda stated that they will assess the impact of Yen movements on inflation to inform policy decisions.

• USD/JPY gains traction near 154.75 in Wednesday’s early Asian session. 
• Fed’s Kashkari noted the Fed might stand put on rates and open the door for hiking if inflation doesn’t ease.
• BoJ Governor said he will closely monitor the JPY's weakness and will consider taking more steps if the currency continues to slide. 

The USD/JPY pair trades in positive territory for the third consecutive day around 154.75 during the early Asian session on Wednesday. The higher-for-longer US rate narrative continues to support the US Dollar (USD) and lift the pair. Nonetheless, further steps from Japanese authorities to prevent the Japanese Yen's current weakness might cap the pair’s upside in the near term. 

The recent hawkish remarks from Minneapolis Fed President Neel Kashkari have boosted the Greenback. Kashkari said on Tuesday that the Fed might stand put on interest rates and open the door to raising the federal funds rate if inflation doesn’t ease. The US Federal Reserve (Fed) committee decided last week to hold its benchmark rate steady in a range of 5.25%–5.50%. The Fed funds rate has been in this range since July 2023. The Fed policymakers emphasized that more clarity would be needed in the inflation outlook before lowering its borrowing costs.

The Bank of Japan (BoJ) hiked interest rates in March for the first time in 17 years, but it remains behind its global rivals, especially the Fed. The interest rate differential between Japan and the US has exerted some selling pressure and made the JPY less appealing. 

The BoJ Governor Kazuo Ueda noted on Tuesday that he will closely monitor the Yen's weakness, and the Japanese central bank will consider taking a policy step if the yen's further slide against the US Dollar (USD). The further possible FX intervention by Japanese authorities is likely to cap the JPY downside for the time being. 

• USD/JPY up over 0.40%, recovering from 153.86 low amid US equity market surge.
• Technical strength as pair surpasses May 3 high of 153.80, indicating further upside potential.
• Continued momentum may test 155.00 resistance; falling below 154.00 could reverse gains.

The USD/JPY climbs late in the North American session, up by more than 0.40%, exchanging hands at 154.66 after bouncing off daily lows of 153.86.  A risk-on impulse sent US equities rallying amid renewed speculations that the US Federal Reserve could cut rates twice in the year, with the first one expected in September.

USD/JPY Price Analysis: Technical outlook

The USD/JPY remains neutral to upward bias following two suspected Bank of Japan (BoJ) interventions. That dragged the pair from around 160.00 toward 151.86 in a matter of five days before bouncing off a 50-day moving average (DMA) during a trading session that formed a ‘hammer.’

That said, the pair has breached the May 3 high of 153.80, which exacerbated a rally past the 154.50 area, opening the door for further gains.

If buyers regain the 155.00 figure, key resistance levels emerge, with the Kijun and Tenkan-Sen at 155.52 and 156.04, respectively. If those levels are cleared, the next resistance would be the May 1 high at 157.98.

On the other hand, if USD/JPY slips below 154.00, that could trigger a reversal, and send the pair toward the Senkou Span B at 153.35, followed by the 50-DMA at 152.07.

USD/JPY Price Action – Daily Chart

• USD/JPY recovers after last week’s losses on possible intervention and weak US jobs data. 
• Janet Yellen’s mild criticism of intervention may have helped the pair higher. 
• Japanese currency officials continue to threaten intervention, filling the road higher with “potholes”. 

USD/JPY trades at 154.35 on Tuesday, up almost three tenths of a percentage point, mainly as a result of the US Dollar (USD) ending its post-FOMC losing streak and recovering on the back of comments from Federal Reserve (Fed) officials suggesting they are not in a hurry to cut interest rates. 

The maintenance of higher interest rates for longer and further delaying of possible cuts is beneficial for the USD as it attracts more foreign capital inflows. This, and the fact that – in the case of USD/JPY – interest rates in the US are so much higher than in Japan, further aids USD and disproportionately disadvantages JPY. 

Barkin Rules out rate cut – BBH

The Federal Reserve bank of Richmond Chair Thomas Barkin said on Monday that he thought rates were high enough to bring inflation back to our target, but that “The full impact of higher rates is yet to come.”  

“This is basically ruling out a rate cut,” concluded analysts at Brown Brothers Harriman: 

Another bullish factor for USD/JPY is that overall interest-rate cut expectations in the US continue to fade. Now it’s not till November that a first rate cut is fully priced in. 

“Odds of a June cut remain steady at around 10%, but July odds have fallen to 35% and September odds have fallen to 85%.  A November cut is still fully priced in,” continues BBH. 

Yellen cautions Japanese authorities 

USD/JPY has benefited from another backdraught of late after it was revealed that Janet Yellen was not as supportive of Japan and Korea using intervention to prop up their currencies as had been thought – especially after their recent currency summit. 

In words over the weekend, Yellen was more critical, saying she’d prefer it if intervention was only used on rare occasions and that the US was notified prior to the event. 

“US Treasury Secretary Janet Yellen’s observation that FX intervention should be rare, and accompanied by consultation, doesn’t suggest a weaker Dollar is particularly desirable,” said Kit Juckes,  FX Strategist at Societe Generale in a note on Tuesday.

“It will embolden Yen bears…but whether we see another test, or a break of USD/JPY 160, depends more on the CPI data than anything else,” he added.  

Ueda changes his mind about impact of weak Yen 

Given the continued verbal warnings from Japan’s various “Princes of the Yen” however, USD/JPY bulls will still need to be mindful of possible “snakes” of intervention bringing prices sliding back down. 

On Tuesday, Bank of Japan (BoJ) Governor Katzuo Ueda once again repeated that excessive Yen moves are undesirable. However, he added that he was closely monitoring how the weak Yen affected “prices”. 

Analysts at BBH point out that this marks a 180 degree pivot for Ueda who said after the April 26 BoJ meeting, that a weak Yen was “not having a big impact on underlying prices yet”. 

His blunder after the BoJ meeting led to “further yen weakness and so Ueda seems to be doing some damage control,” BBH added. 

Ueda’s change of tone may be designed to appease certain business groups who are not happy with a weak Yen.  The chairman of Japan’s Keidanren business lobby, Masakazu Tokura, said recently, the Yen is too weak beyond 150 to the Dollar.

Further, top currency diplomat Masato Kanda also repeated his usual warning that the government will respond appropriately if there are excessive or disorderly movements in the FX market. 

All in all it suggests many reasons why the Japanese authorities are still probably ready to pull the trigger on further intervention, suggesting USD/JPY's ride higher could continue to be a bumpy one. 

• USD/JPY gained ground due to an upward correction in the Greenback
• The US Dollar could face challenges due to rekindled hopes for rate cuts by the Fed in 2024.
• The safe-haven Japanese Yen depreciates amid the prevailing risk appetite.

USD/JPY extends gains for the second successive session, trading around 154.00 during the European hours. The upward correction in the US Dollar (USD) provides support for the US Dollar, consequently, underpinning the USD/JPY pair. However, the Greenback could face resistance due to investors’ optimism following the softer US labor data on Friday. This development has reignited hopes for potential interest rate cuts by the Federal Reserve (Fed) in 2024.

According to Bloomberg, Richmond Federal Reserve (Fed) President Thomas Barkin said on Monday that elevated interest rates would likely restrain economic growth in the United States (US). Meanwhile, higher interest rates help to mitigate inflationary pressures, aligning them more closely with the central bank's 2% target.

Barkin also emphasized that the strong labor market offers the Federal Reserve an opportunity to confirm a sustained decline in inflation before considering adjustments to borrowing costs. However, he cautioned about the persistent inflationary pressures in the housing and services sectors, which pose a risk of sustaining elevated price levels.

The US Dollar Index (DXY), which gauges the performance of the US Dollar (USD) against six major currencies, trades higher around 105.20. The weaker US Treasury yields contribute to limiting the advance of the US Dollar. 2-year and 10-year yields on US Treasury bonds stand at 4.80% and 4.45%, respectively, by the press time.

In Japan, Masato Kanda, Japan's top currency diplomat, hinted at potential measures to address excessive market fluctuations earlier on Tuesday. Last week, the Japanese Yen (JPY) experienced appreciation amid speculation of government intervention by Japanese authorities. Reuters reported data from the Bank of Japan (BoJ) indicating that Japanese authorities may have allocated around ¥6.0 trillion on April 29 and ¥3.66 trillion on May 1 to support the JPY.

Masakazu Tokura, Chairman of KEIDANREN (Japan Business Federation), expressed that FX rates should reflect fundamentals in the medium to long term. Tokura stated uncertainty regarding whether authorities intervened but noted that if they did, the timing was opportune, as reported by forexlive.com.

• USD/JPY gains ground near 154.10 in Tuesday’s early Asian session. 
• The Fed's Barkin said he has not yet seen evidence that inflation is on track.
• The risk-on environment weighs on the Japanese Yen (JPY).

The USD/JPY pair trades on a stronger note around 154.10 on Tuesday during the early Asian trading hours. The recovery of the pair is supported by the modest rebound of US Dollar (USD) to 105.1o after bouncing off three-week lows. The Federal Reserve Bank of Minneapolis President, Neel Kashkari, is set to speak later on Tuesday. 

The downbeat US Nonfarm Payrolls (NFP) and Services PMI last week have prompted the expectation that the US Federal Reserve (Fed) will cut interest rates this year. Traders expect the Fed to start lowering its borrowing costs at the September meeting. However, Fed Governor Michelle Bowman said last week that she would be willing to raise interest rates further if progress in inflation declining to 2% stalls or reverses. 

Richmond Fed President Thomas Barkin said on Monday that he has not yet seen evidence that inflation is on track, adding that the strength of the job market will give officials time to gain confidence that inflation will fall. Meanwhile, New York Fed President John Williams noted that there would be rate cuts eventually. Williams further stated that he is seeing job growth moderate and that the Fed is looking at the “totality” of the data. Investors will monitor Fedspeak this week. The dovish tone from Fed officials might exert some selling pressure on the Greenback against its rivals. 

On the JPY’s front, the risk-on mood continues to undermine safe-haven currencies like the Japanese Yen (JPY). Earlier Tuesday, Japan's top currency diplomat, Masato Kanda, said that the Japanese authorities may take the necessary steps to deal with excessive market volatility, but declined to comment on US Treasury Secretary Janet Yellen's remarks on FX policy. The recent possible intervention from the Japanese government was seen on Friday after the April US jobs report came in below expectations.

• USD/JPY climbs over 0.60% from two-week low, as positive sentiment reduces yen's safe-haven appeal.
• Hammer candlestick at 152.97 on Friday signals potential upward momentum.
• Resistance seen at 154.00, with further targets at 155.52 (Tenkan-Sen) and 155.78 (Senkou Span A).

The USD/JPY bounced off a two-week low and climbed toward the 153.90ish area, shy of decisively cracking the 154.00 mark. It is trading with gains of more than 0.60%. The market sentiment is upbeat, a headwind for safe-haven currencies like the Japanese Yen (JPY).

USD/JPY Price Analysis: Technical outlook

The USD/JPY remains upward biased. On Friday, the pair hit the two-week low of 151.99, though finished the session at 152.97, forming a ‘hammer,’ a candlestick chart pattern. This chart pattern is bullish when preceded by a downtrend, but it needs to be followed by a candle that breaches the ‘hammer’s’ high.

With that said, the USD/JPY cleared the May 3 high at 153.80, opening the door for further gains. Therefore, the first resistance would be the 154.00 mark. Once cleared, up next would be the Tenkan-Sen at 155.52, followed by the Senkou Span A at 155.78. Further gains are seen at 156.05.

For a bearish resumption, sellers must clear the 50-DMA at 151.99, which could pave the way to testing the following lowest low at 150.81.

USD/JPY Price Action – Daily Chart

• USD/JPY holds gains near 154.00 despite soft US Dollar.
• Weak US data builds pressure on the US Dollar.
• The speculation for Japan intervention to support the Japanese Yen remains firm.

The USD/JPY pair trades sideways slightly below 154.00 in Monday’s early American session. The asset consolidates as trading volume remain thin in Monday’s session due to holiday in Japanese markets on account of Children’s Day. The major struggles to move higher despite weak United States economic data sends the US Dollar on the backfoot

Poor US Nonfarm Payrolls and weak Services PMI have weighed on the US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, fell slightly below of 105.00. The US NFP report released on Friday showed that fewer jobs were created and the joblessness rise, suggesting consequences of interest rates remaining higher by the Fed.

The market sentiment is risk-on amid firm expectations that the Federal Reserve (Fed) will start reducing interest rates from the September meeting. The S&P 500 opens on a bullish note, suggesting strong demand for risk-sensitive assets. 10-year US Treasury yields rise slightly to 4.50% but have come down significantly on firm Fed rate-cut prospects.

While investors speculate for the Fed beginning to reduce interest rates from the September meeting. Fed Governor Michelle Bowman said on Friday she would be willing to raise interest rates further if progress in inflation declining to the 2% stalls or reverses.

On the Tokyo front, investors see the Japan intervening to uplift the Japanese Yen against the US Dollar. However, Japan’s intervention is a short-term support and won’t bring any fundamental change in the Japanese Yen. Investors want to see evidence which could bring confidence over wage growth spiral.

• USD/JPY could receive pressure due to revived expectations for the Fed’s interest rate cuts in 2024.
• US Nonfarm Payrolls reported fresh 175K jobs were added in April, lower than the estimated 243K.
• Japanese markets are closed on Monday due to a national holiday, with the possibility of intervention by authorities still present.

USD/JPY snaps its three-day losing streak on Monday, trading around 153.70 during the early European hours. This decline in the USD/JPY pair could be attributed to the rebound in the US Dollar (USD).

The US Dollar Index (DXY), which gauges the performance of the US Dollar (USD) against six major currencies, hovers around 105.10, by the press time. The lower US Treasury yields could limit the advance of the Greenback.

However, the US Dollar struggled due to softer-than-expected US jobs data released on Friday. This development revived hopes for potential interest rate cuts by the US Federal Reserve (Fed) later this year. The prevalent risk appetite may continue this week following Fed Chair Jerome Powell's relatively dovish stance on the monetary policy outlook during Wednesday's session.

Federal Reserve Bank of Chicago President Austan Goolsbee, speaking to Bloomberg TV on Friday, characterized the April labor market data as robust. Goolsbee stressed the importance of the Fed to evaluate its commitment to reducing inflation. He highlighted that if the Fed persists with a restrictive stance for an extended period, it will have to consider the employment aspect of its mandate.

In Japan, markets are closed on Monday due to a national holiday, with intervention risks lingering. Last week, the Japanese Yen (JPY) appreciated amidst potential government intervention by Japanese authorities. Reuters reported that data from the Bank of Japan (BoJ) indicated that Japanese authorities may have allocated approximately ¥6.0 trillion on April 29 and ¥3.66 trillion on May 1 to reinforce the JPY.

• USD/JPY gains ground near 153.55 in Monday’s Asian session. 
• US Treasury Secretary counsels caution on currency intervention from Japanese authorities. 
• The US NFP increased by 175K in April, compared to 315K in March, missing the estimation of 243K. 

The USD/JPY pair snap a three-day losing streak during the Asian trading hours on Monday. The uptick of the pair is bolstered by the modest rebound of the US Dollar (USD) and US Treasury Secretary Janet Yellen’s comments on potential Japanese interventions last week. The pair currently trades around 153.55, adding 0.35% on the day.  
 
US Treasury Secretary Janet Yellen noted on the weekend the sharp movements in the Japanese Yen's value last week but declined to comment on whether Japan intervened to support the currency. “I’m not going to comment on whether they did or didn’t intervene,” Yellen said. Her comments on prospective Japanese interventions have varied over the last two years, often emphasizing a Group of Seven agreement in support of market-determined currency rates. Yellen emphasized that interventions should only try to reduce market volatility rather than manipulate currency rates. Meanwhile, Japan's Finance Minister Shunichi Suzuki did not confirm the interventions, as per Bloomberg.

The growing speculation that the US Federal Reserve (Fed) will cut the interest rate in September after the release of weaker-than-expected US employment data has exerted some selling pressure on the Greenback. According to the CME Fedwatch tool, traders are now pricing in an 85.5% chance that June will still see no change to the Fed fed fund rate, while the odds of a September rate cut rise to 90%. 

The US employment report released on Friday showed hints that the US economy is slowing. The Nonfarm Payrolls (NFP) increased by 175K in April, from 315K in March (revised from 303K), falling short of the estimated 243K. The figure was the lowest increase since October 2023. The Unemployment Rate rose to 3.9% in April, while Average Hourly Earnings fell by 3.9% year on year. Finally, the US ISM Services PMI slipped into contractionary territory, dropping from 51.4 in March to 49.4 in April, below the market estimate of 52.0.