USD/JPY Forecast: Sparking Intervention Worries Near 160.00

• The yen has lost 1.4% of its value against the dollar in June.

• The Bank of Japan has held back from further rate hikes due to poor economic demand.

• Investors are gearing up for the US PCE price index report on Friday.

The USD/JPY forecast reveals a surge in bullish momentum as the yen hovers near $160.00, raising concerns about a possible intervention. Meanwhile, the dollar was steady as investors prepared to receive more US inflation data this week.

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The yen has lost 1.4% of its value against the dollar in June. This decline came mostly from the dovish Bank of Japan policy meeting. At the June meeting, the central bank failed to reduce its bond purchases. At the same time, the currency has remained weak due to the gap in interest rates between Japan and the US. Consequently, it trades near $160.00, a line in the sand for Japanese authorities. This level led to interventions in April and May.

Notably, the Bank of Japan has held back from further rate hikes due to poor economic consumption, which has kept inflation low. On the other hand, the Federal Reserve has delayed rate cuts. Moreover, it might only cut once this year in December. This means that the wide gap in rates between Japan and the US has remained, increasing demand for the dollar at the expense of the yen.

Meanwhile, the US dollar was steady after Friday’s data showed a bigger-than-expected expansion in the manufacturing and services sectors. Investors are now gearing up for the PCE price index report on Friday, which will give more clues on the Fed’s policy outlook.

USD/JPY key events today

Neither the US nor Japan will release any high-impact report today. Therefore, trading might be thin.

USD/JPY technical forecast: Bulls face solid resistance zone

On the technical side, the USD/JPY price has surged to the 1.618 Fib extension level. Moreover, the bullish bias is strong because the price sits well above the 30-SMA with the RSI in the overbought region. 

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However, this bullish move has reached a solid resistance zone comprising the 1.618 Fib and the 160.01 level. Therefore, there is a high chance that bears will emerge and push the price lower. Such an outcome could lead to a retest of the 30-SMA or the bullish trendline. However, if bulls remain strong, the price will breach this zone, seeking new highs.

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