- The yen recovered as concerns about intervention persisted.
- US Treasury yields dropped from multi-year highs overnight.
- Core inflation slowed for the third consecutive month in Japan’s capital.
On the last trading day of the quarter, the USD/JPY outlook was bearish as the dollar retreated from its 10-month high against a basket of currencies. Consequently, the yen got some breathing room as concerns about intervention persisted.
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US Treasury yields dropped from multi-year highs overnight, hurting the dollar.
Meanwhile, markets eagerly await upcoming data releases, starting with significant US personal consumption data scheduled for later Friday. However, the looming threat of a partial government shutdown could disrupt economic data release.
The absence of data could create uncertainty, and as the Federal Reserve assesses the need for another rate increase this year, it may face a “vacuum of uncertainty,” as noted by Tony Sycamore, a market analyst at IG.
On Thursday, Richmond Fed President Thomas Barkin expressed uncertainty about whether further monetary policy changes would be necessary in the coming months.
In Japan’s capital, core inflation slowed for the third consecutive month in September. This decline was primarily due to declining fuel costs.
Moreover, separate data indicated that factory output in August remained stagnant compared to July. It indicates that companies grappled with the impact of soft global demand and the sluggish growth of China’s economy.
Even though currency intervention may have limited effects, Yasunari Ueno, chief market economist at Mizuho Securities, suggested that “the government would lose nothing politically by demonstrating to the Japanese public that it is serious about tackling the surge in import prices that results from a weaker yen.”
USD/JPY key events today
Investors will get a view of US inflation with the following reports
- Core PCE Price Index (MoM) (Aug)
- Core PCE Price Index (YoY) (Aug)
USD/JPY technical outlook: 30-SMA break imminent.
On the technical side, the USD/JPY price bears are about to take over with a break below the 30-SMA. This comes after the bullish trend met strong resistance at the 149.50 level. Furthermore, the RSI shows a shift in sentiment to bearish as it has crossed below 50.
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Bears will be in charge if the price closes below 30-SMA. They will then face the next support level at 148.51. However, if the price pulls back to close above the SMA, bulls might return to take out the 149.50 resistance.
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