- The Japanese Yen gains ground following the Jibun Bank Services PMI report on Wednesday.
- Japan’s Yoshimasa Hayashi is closely monitoring both domestic and international market developments.
- The US Dollar remains stable as traders exercise caution ahead of US employment data.
The Japanese Yen (JPY) continues to strengthen against the US Dollar (USD) following Wednesday's release of the Jibun Bank Services PMI data. The index was revised to 53.7 for August, slightly down from the initial estimate of 54.0. Despite this being the seventh consecutive month of expansion in the service sector, the latest figure remains unchanged from July.
Japan’s Chief Cabinet Secretary Yoshimasa Hayashi remarked on Wednesday that he is "closely monitoring domestic and international market developments with a sense of urgency." He underscored the need for coordinated fiscal and economic policy management with the Bank of Japan (BoJ) and highlighted the importance of a measured approach to market movements, though he refrained from commenting on daily stock fluctuations.
The US Dollar remains supported as traders exercise caution ahead of key US employment data, particularly the August Nonfarm Payrolls (NFP). This data could offer further insights into the timing and magnitude of potential Federal Reserve (Fed) rate cuts.
Daily Market Digest: Japanese Yen extends gains on hawkish sentiment surrounding the BoJ
The US ISM Manufacturing PMI edged up to 47.2 in August from 46.8 in July, falling short of the market expectation of 47.5. This marks the 21st contraction in US factory activity over the past 22 months.
On Tuesday, Japan announced plans to allocate ¥989 billion to fund energy subsidies amid rising energy costs and related cost-of-living pressures.
The US Bureau of Economic Analysis reported on Friday that the headline Personal Consumption Expenditures (PCE) Price Index increased by 2.5% year-over-year in July, matching the previous reading but falling short of the estimated 2.6%. Core PCE, which excludes volatile food and energy prices, rose by 2.6% year-over-year in July, consistent with the prior figure but slightly below the consensus forecast of 2.7%.
Tokyo’s Consumer Price Index (CPI) rose to 2.6% year-on-year in August, up from 2.2% in July. Core CPI also increased to 1.6% YoY in August, compared to 1.5% previously. Additionally, Japan’s Unemployment Rate unexpectedly climbed to 2.7% in July, up from both the market estimate and June’s 2.5%, marking the highest jobless rate since August 2023.
Federal Reserve Bank of Atlanta President Raphael Bostic, a notable hawk on the FOMC, suggested last week that it might be "time to move" on rate cuts due to cooling inflation and a higher-than-expected unemployment rate. FXStreet’s FedTracker, which assesses the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10, rated Bostic’s comments as neutral with a score of 5.6.
The US Gross Domestic Product (GDP) grew at an annualized rate of 3.0% in the second quarter, exceeding both the expected and previous growth rate of 2.8%. Additionally, Initial Jobless Claims decreased to 231,000 for the week ending August 23, down from 233,000 previously and slightly below the expected 232,000.
Japan’s Finance Minister Shunichi Suzuki stated last week that foreign exchange rates are influenced by various factors, including monetary policies, interest rate differentials, geopolitical risks, and market sentiment. Suzuki noted that predicting the impact of these factors on FX rates is challenging.
Technical Analysis: USD/JPY bounces off the 21-day EMA, with further downward pressure anticipated
USD/JPY is trading around 145.40 on Wednesday. Analyzing the daily chart reveals that the nine-day Exponential Moving Average (EMA) is below the 21-day EMA, indicating a bearish trend. Additionally, the 14-day Relative Strength Index (RSI) remains below 50, reinforcing the bearish outlook.
For the USD/JPY pair, immediate support may be found around the seven-month low of 141.69, recorded on August 5, with the next significant support level near 140.25.
On the upside, the pair may first face resistance at the nine-day EMA around 145.63, followed by the 21-day EMA at 146.73. A break above this level could lead to a move toward the psychological barrier of 150.00, with further resistance at 154.50, a level that has shifted from support to resistance.
USD/JPY: Daily Chart
