Japanese Yen Dips as US Dollar Rises on Yield Boost, Fed Rate Cut Speculation Intensifies

Japanese bond yields have retreated from recent highs, and real wages in Japan have experienced a 25th consecutive month of decline due to persistent inflation. This presents a challenge for the Bank of Japan (BoJ) in normalizing its policy. The US Dollar Index (DXY) faced pressure following mixed US economic data, fueling speculation about potential rate cuts by the Fed. CME FedWatch Tool data indicates a nearly 70% probability of a Fed rate cut in September.

Market Movers: Yen and Dollar Dynamics

BoJ Governor Kazuo Ueda stated that inflation expectations are gradually rising but remain below the 2% target, suggesting a continuation of the current policy. BoJ board member Toyoaki Nakamura emphasized the need for increased disposable income to boost spending.

Economic data showed a mixed picture, with the ISM US Services PMI exceeding expectations, while the ADP US Employment Change report indicated a slowdown in job growth. The Jibun Bank Japan Services PMI was revised upwards but still indicated slower growth than in April.

Technical Analysis: USD/JPY Holds Above 155.50

The USD/JPY pair traded around 155.60 on Thursday. Technical analysis suggests a weakening bullish bias as the pair breaks below a symmetrical triangle pattern, and the RSI is slightly below 50. Immediate support is located at 156.00, followed by the 50-day EMA at 154.69. A break below this level could push the pair towards the 151.86 support region.

On the upside, a key resistance level lies at the lower boundary of the symmetrical triangle. A break above 157.00 could lead to a retest of the multi-decade high at 160.32.