- The Japanese government is likely to warn of the effects of a weak yen in its economic policy roadmap.
- Business activity in the US manufacturing sector decreased in May.
- Markets are pricing in a 59.1% chance of a Federal Reserve rate cut in September.
USD/JPI price analysis points to renewed bearish sentiment as the yen rises amid mounting pressure on the Bank of Japan to raise interest rates. Meanwhile, the dollar weakened after the previous session’s PMI data revealed another month of contraction in the manufacturing sector.
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In particular, Bank of Japan Deputy Governor Ryozo Himino said the central bank should be interested in the impact of a weak currency as it conducts monetary policy. Meanwhile, the Japanese government is likely to warn of the effects of a weak yen in its economic policy plan for 2024. Analysts believe this will put pressure on the BoJ to raise rates, mainly if a weak yen boosts imported inflation.
Meanwhile, the dollar tried to recover after hitting new monthly lows on Monday due to poor US economic data. Business activity in the manufacturing sector eased in May, with the ISM PMI falling from 49.2 to 48.7. This decline indicated a slowdown in the economy due to high interest rates. As a result, expectations of interest rate cuts have increased, leading to a decrease in Treasury yields. Accordingly, the yen, which is sensitive to movements in US yields, rose.
Following the report, markets are pricing in a 59.1% chance of a Federal Reserve rate cut in September. Later in the day, investors will closely scrutinize the US job vacancies report. This will shape the outlook for rate cuts in the US.
USD/JPI Key Events Today
USD/JPI technical price analysis: Bears are breaking the uptrend line
On the technical side, the USD/JPI trend reversed from bullish to bearish with a break below the 30-SMA and the bullish trend line. The bullish trend weakened when it made a new high above 156.50 but failed to reach the next key resistance at 158.01.
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At this point, the price made a lower high and broke below the 30-SMA, the 156.50 level and the bullish trend line. Currently, the path is clear for the bears to retest the 154.02 support level. Furthermore, the downtrend will remain intact if the price remains below the 30-SMA and the RSI in bearish territory below 50.
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