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Fears of Intervention Cause USD/JPY Bulls to Become Cautious at 159.00, the Highest Level Since April
USD/JPY is currently at its greatest level since April, which was reached earlier this Friday. The JPY is undermined by the BoJ's uncertainty regarding rate hikes and the muddled National CPI data from Japan. The USD and the pair's advances are restricted by September Fed rate cut wagers amid concerns regarding intervention.
During the Asian session on Friday, the USD/JPY pair fluctuates within a narrow range and maintains its recent gains, which have taken it to the 159.00 region, the highest level since late April, which was reached in the last hour. The currency pair's potential for an additional near-term appreciation is supported by the fundamental backdrop; however, intervention concerns may limit the upside.
The Japanese Yen (JPY) is still being undermined by the Bank of Japan's (BoJ) lack of commitment to raising interest rates in the near term. Additionally, data released earlier this Friday indicated that Japan's core-core Consumer Price Index (CPI), which excludes food and energy prices, experienced a ninth consecutive month of decline and decreased to a yearly rate of 2.1% from the previous rate of 2.4%. This, in conjunction with the underlying favourable sentiment in the global equity markets, reduces demand for the safe-haven JPY and serves as a tailwind for the USD/JPY pair. Additionally, it increases the ambiguity regarding whether the BoJ will increase interest rates in July or later in the year.
In contrast, the US Dollar (USD) is currently situated at the upper end of its weekly trading range as a result of the significant increase in US Treasury bond yields that occurred overnight. This leads to an additional widening of the US-Japan rate differential, which is perceived as a factor that is negatively impacting the JPY and providing support to the USD/JPY pair. In the interim, investors are on the alert due to rumours that the Japanese government may intervene to support the domestic currency. Furthermore, the Greenback and any additional gains for the currency pair may be muted by the increasing odds of the Federal Reserve's (Fed) rate-cutting cycle commencing in September.
However, the USD/JPY pair is set to conclude the week in positive territory for the second consecutive week, as investors anticipate the publication of the global flash PMI readings to provide a significant boost. In addition, the release of Existing Home Sales data from the United States, as well as the US bond yields and the broader market risk sentiment, may also contribute to the creation of short-term trading opportunities on the final day of the week.
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