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The Bank of Japan will hold three key meetings, and USD/JPY is hovering around the 161 mark

2024-07-10

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USD/JPY traded in a narrow range around the 161 mark, with the yen struggling as Japanese individuals bought overseas assets through the newly revised tax-free investment program "Japan Individual Savings Account" (NISA). The Bank of Japan will hold three key face-to-face meetings to assess possible strategies to reduce government bond purchases. However, the yen's losses may be limited due to concerns that Japanese authorities are intervening in the foreign exchange market.

The yen has been struggling as Japanese individuals bought overseas assets through the newly revised NISA program, and the size of these purchases is expected to exceed the country's trade deficit in the first half of this year, according to Nikkei Asia.

U.S. Treasury yields are under pressure due to growing market speculation that the Federal Reserve may cut interest rates in September, which may limit the dollar's upside. CME's Fed Watch tool shows that interest rate markets are pricing in a 76.2% chance of a rate cut in September, up from 65.5% a week ago.

Fed Chairman Powell will deliver his "Semi-annual Monetary Policy Report" to the U.S. Congress on Tuesday, and he is likely to give a broad overview of the economy and monetary policy. His prepared remarks will be released before his appearance before Congress.

The Bank of Japan will hold three face-to-face meetings with banks, securities firms and financial institutions in the coming days, with the goal of assessing the feasible pace of reducing the size of its JGB purchases, Bloomberg reported on Tuesday.

In the first six months of this year, Japanese investment trust management companies and asset management companies bought 6.16 trillion yen, or about $38 billion, more overseas stocks and investment fund shares than they sold, the Ministry of Finance reported on Monday.

Foreign exchange analysts at Rabobank noted that they expect the dollar/yen to remain around 160 next month and fall back to 152 by the end of the year. "The dollar is likely to remain under pressure in the coming weeks, with the dollar/yen remaining around 160."

On Monday, the Bank of Japan maintained its economic assessments for five of Japan's nine regions in its latest "Sakura Report." Two regions were upgraded in the report released on Monday, while the other two were downgraded. On price trends, the Bank of Japan noted that many regions reported that wage increases were spreading among small businesses.

Japan's current account surplus grew for the 15th consecutive month in May, with the Ministry of Finance reporting on Monday that the current account surplus rose to 2.8499 trillion yen, or $17.78 billion, from 2.505 trillion yen the previous month, beating market expectations of 2.45 trillion yen.

The U.S. nonfarm payrolls report (NFP) for June increased by 206,000, compared with 218,000 in May, beating market expectations of 190,000. The minutes of the Fed's June 11-12 monetary policy meeting released on Wednesday showed that Fed officials are in a wait-and-see mode.

"Some participants emphasized that the committee's policy decisions are data-based and that monetary policy decisions depend on economic developments rather than on a pre-set path."

USD/JPY technical analysis

FXStreet analyst Akhtar Faruqui said that USD/JPY is still in an ascending channel mode, indicating a bullish bias based on the daily chart analysis. In addition, the momentum indicator 14-day relative strength index (RSI) remains above the 50 level, confirming the bullish trend.

USD/JPY may test the key resistance near the upper boundary of the ascending channel at 162.55. A break above this level may strengthen the bullish sentiment and may push the pair towards the psychological resistance at 163.00.

On the downside, USD/JPY may find immediate support at the 21-day exponential moving average (EMA) near 159.78. A break below this level may put pressure on the pair to test the lower boundary of the ascending channel around 159.40.

A further break below this channel support may cause the pair to hover around the June low of 154.55.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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The Bank of Japan will hold three key meetings, and USD/JPY is hovering around the 161 mark

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