- The yen declined and approached its lowest level against the dollar in eight months.
- Japan’s Suzuki stated that Japan would take appropriate measures to curb the yen’s weakening.
- Japanese business sentiment improved in the second quarter.
Today’s USD/JPY outlook is bullish. On Monday, the yen declined and approached its lowest level against the dollar in eight months, indicating a looming intervention by authorities. Meanwhile, the dollar rose slightly ahead of the 4th of July holiday.
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The yen weakened against the dollar after touching its lowest point since November last Friday. Moreover, it experienced a 9% decrease against the dollar in the year’s first half. Finance Minister Shunichi Suzuki stated on Friday that Japan would take appropriate measures to address the excessive weakening of the yen.
Paul Mackel, Global Head of FX Research at HSBC, commented, “The yen is being monitored for potential intervention. Furthermore, the upcoming data focus will be Japan’s May wage growth, coming out on July 7th.”
Notably, Japan engaged in market intervention in September, marking its first attempt to bolster its currency since 1998. This decision was made in response to the Bank of Japan’s ultra-loose policy, which caused the yen to decline to as low as 145 per dollar. Japan intervened again in October when the yen plunged to a 32-year low of 151.94 against the dollar.
Meanwhile, a central bank survey revealed that Japanese business sentiment improved in the second quarter. The easing of supply constraints and lifting of pandemic restrictions led to increased factory output and consumption. This indicated a stable recovery in the economy.
USD/JPY key events today
The US will release the ISM manufacturing PMI report today. This report will show the level of business activity in the manufacturing sector. Moreover, investors expect to see an increase from the previous month’s reading.
USD/JPY technical outlook: Bulls resume uptrend as 30-SMA support holds firm.
USD/JPY pulled back from recent highs but found support at the 30-SMA. The price is currently bouncing higher from the SMA. Therefore, the bullish bias is still intact. Furthermore, there is strong bullish momentum, shown in the RSI, which remains above 50.
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Bulls will likely soon retest the 145.01 resistance level. If this level is firm, the price will likely make a double top and reverse lower. However, if bulls are stronger, they will break above 145.01 and seek a higher high. Consequently, the bullish bias will strengthen.
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Saqib Iqbal
