The USD/JPY Trades With a Slight Negative Bias Near The Mid-144.00s, But The Downside Appears Capped
On Tuesday, USD/JPY continues to struggle to surpass 145.00 and edges lower. Fears of intervention prevent bulls from making aggressive wagers and exert pressure on the pair. In light of the policy divergence between the Bank of Japan and the Federal Reserve and in advance of crucial US data, the downside potential remains limited.

During Tuesday's Asian session, the USD/JPY pair struggles to capitalise on the previous day's positive move back towards the 145.00 psychological mark and edges lower. Spot prices are currently around 144.50, down 0.10 percent on the day, but remain within striking distance of the highest level since November 2022, which was reached last Friday.
Recent threats by Japanese authorities fueled rumours of a possible intervention in the currency markets, which is seen as a key factor that continues to act as a headwind for the USD/JPY currency pair. Last week, Japan's Finance Minister Shunichi Suzuki warned that the government would take appropriate action if the Japanese Yen (JPY) weakened excessively. In addition, the Bank of Japan (BoJ) stated that it must closely monitor the potential effects of exchange-rate fluctuations on the economy.
The USD/JPY pair is supported by expectations that the Bank of Japan will maintain its ultra-easy monetary policy stance, which restrains any significant gains for the JPY. In light of the belief that inflation will moderate later this year, the BoJ pledged to maintain stimulus and concentrate on bolstering a fragile economic recovery. In addition, BoJ Governor Kazuo Ueda ruled out any change in ultra-loose policy settings and signalled that there are no immediate intentions to alter yield curve control measures.
This represents a significant divergence from the more hawkish outlook of other major central banks, including the Federal Reserve (Fed), and bolsters the likelihood of dip-buying in the USD/JPY pair. In fact, the Fed indicated in June that borrowing costs may need to increase by up to 50 basis points by the end of the year. Fed Chair Jerome Powell's comments last week bolstered the outlook, but the US Dollar (USD) has struggled to gain meaningful traction in the aftermath of weaker US macro data.
The Bureau of Economic Analysis reported that the annual PCE Price Index slowed to 3.8% in May from 4.3% in April, while the core index dipped to 4.6% from 4.6%. In addition, the Institute of Supply Management's (ISM) Manufacturing PMI fell to its lowest level since May 2020, registering 46.0 in June. This is the eighth consecutive month of contraction and adds to fears of a global economic slowdown, which may benefit the JPY's safe-haven status and limit the USD/JPY pair's upside.
Ahead of this week's key releases from the US, including the FOMC meeting minutes on Wednesday, traders may also refrain from placing aggressive bets and prefer to remain on the sidelines. Investors will seek fresh hints regarding the Fed's future rate-hike trajectory. Aside from this, the closely-watched US monthly employment report - commonly referred to as NFP on Friday - will play a key role in determining the next leg of a directional move for the USD/JPY pair and influencing the near-term USD price dynamics.
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