- USD/JPY has shown signs of exhaustion in the upside momentum.
- Further upside in the USD Index is still favored as the Fed is consistently reiterating the need for more rate hikes.
- Reuters reported that Japan’s government and the BoJ will act to stop the yen’s decline if it depreciates to the 145 per U.S. dollar level.
The USD/JPY pair is struggling to maintain stability above the crucial resistance of 143.00 in the London session. Earlier, the asset printed a fresh eight-month high at 143.45 after getting strength from the upbeat US Dollar Index (DXY). However, further upside looks gloomy as investors are hoping for a stealth intervention by the Bank of Japan (BoJ) to provide some cushion to the weak Japanese Yen.
S&P500 futures have trimmed some losses in Europe, however, the risk-aversion theme is still in action. Significant risks of global recession due to higher interest rates by central banks are weighing heavy pressure on risk-sensitive assets.
The US Dollar index has faced some and has dropped to near 103.00. Meanwhile, further upside is still favored as the Federal Reserve (Fed) is consistently reiterating the need for further policy tightening. Going forward, US preliminary S&P data (June) will be keenly watched. As per the prior estimation report, Manufacturing PMI will show a mild increase to 48.5 vs. the prior release of 48.4. Services PMI is seen declining to 54.0 against the former release of 54.9.
Meanwhile, Reuters reported that more than half of economists polled by Reuters favored that Japan’s government and the Bank of Japan (BoJ) will act to stop the yen’s decline if it depreciates to the 145 per U.S. dollar level. This could be done by a stealth intervention from the BoJ.
On the Japanese Yen front, soft inflation data has added some pressure. Scrutiny of Japan’s inflation report conveyed that contribution from higher oil prices is fading and domestic demand is contributing effectively. This could be the outcome of higher wages due to consistent monetary stimulus by the BoJ.