- The Japanese yen has appreciated to the vicinity of 145 yen against the US dollar, reaching its highest levels in about two weeks due to the weakening US dollar and increased expectations of monetary policy easing by the Federal Reserve.
- Last week, Chicago Fed President Austan Goolsbee said the US labor market and some leading economic indicators were flashing warning signs, citing rising credit card delinquency rates.
Domestically, investors absorbed economic data showing that Japan's machinery orders, an indicator of capital spending, rose 2.1% month-on-month in June, exceeding expectations of a 1.1% increase. Markets are now looking to Japanese inflation figures later this week for clarity on the Bank of Japan's monetary policy path. Overall, the Japanese yen (JPY) has risen against the US dollar (USD) for the second consecutive day, driven by hawkish sentiment surrounding the Bank of Japan (BoJ) and growing geopolitical tensions. Stronger-than-expected growth in Japan's GDP in the second quarter has fueled expectations that the BoJ may consider raising interest rates in the near term, contributing to the yen's appreciation.
According to the economic calendar results, data last week showed that Japan’s economy expanded by 0.8% on a quarterly basis in the second quarter, after contracting by 0.6% in the first quarter and beating expectations by 0.5%. On an annual basis, the economy grew by 3.1% in the second quarter, reversing from a 2.3% decline in the first quarter and beating expectations for a 2.1% growth.
On the stock trading platforms, Japanese stocks fall on profit-taking. According to Monday’s trading, the Nikkei 225 index of Japanese shares fell 1.77% to close at 37,388 points, while the broader TOPIX index lost 1.4% to 2,641 points, ending a five-day advance amid profit-taking and as the rising yen pressured domestic stocks. Also, the strong Japanese yen hurts the earnings outlook for Japan’s export-dependent industries and discourages investors from borrowing in the currency to invest in higher-yielding assets.
Also, investors digested data showing that Japan’s machinery orders, a proxy for capital spending, rose 2.1% on-month in June, beating expectations for a 1.1% gain. According to the trading, the heavyweights in the index such as Disco Corp (-4.7%), Tokyo Electron (-3.1%), SoftBank Group (-2.1%), Toyota Motor (-3.1%), and Fast Retailing (-2.6%) witnessed significant losses.
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USD/JPY Technical Analysis and Expectations Today
According to the performance on the daily chart, the USD/JPY price returned to its broader downward path. Technically, breaking the support of 144.00 will support the next stronger downward move towards the psychological support of 140.00, and before that. Also, the technical indicators will move towards strong oversold levels. On the other hand, and over the same period of time. furthermore, the psychological resistance of 150.00 will remain an important element for bulls to advance further. Ultimately, the USD/JPY pair may remain in its current bearish range until markets and investors react to the announcement of the minutes of the last US Federal Reserve meeting and what will be said by global central bank officials at the Jackson Hole symposium.
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