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USD/JPY weakens further as traders jitter amid recent intervention risks

  • The Japanese Yen is set to lock in a staggering performance for this week against the US Dollar. 
  • The Yen has appreciated over 3% following Japan’s intervention to propel the currency and the Fed’s less-hawkish rhetoric. 
  • The US Dollar Index holds ground above 105.00 but downside pressure builds up. 

The Japanese Yen (JPY) is set to book one of its best weeks in history against the US Dollar. Since last Friday, a string of (un)confirmed interventions have pushed the USD/JPY pair from roughly 160.00 to 153.00. As the dust settles, the question is for how long the effect from these interventions will linger, and if they can keep USD/JPY trading at current levels or lower. 

Meanwhile, the DXY US Dollar Index – which gauges the value of the US Dollar (USD) against a basket of six foreign currencies – is holding up around 105.00 as markets are stepping away in order not to get steamrolled by the Japanese interventions. Still, the recent depreciation of the Greenback could offer a window of opportunity for US Dollar buyers to step in and gear up for a profitable ride higher. This upturn could already happen on Friday with the US Jobs Report data for April on the docket. More broadly, the significant rate differential between the US and Japan isn’t likely to allow this big appreciation of the JPY against the USD to last long. 

Daily digest market movers: US Jobs report ahead

  • At 12:30 GMT, the US Employment Report for April is set to be released:
    • US Nonfarm Payrolls changes are expected to increase by 243,000, lower than the 303,000 rise seen in March.
    • Monthly Average Hourly Earnings are expected to grow at a stable 0.3%.
    • The Unemployment Rate is set to remain at 3.8%.
  • Several Japanese companies have reported to Bloomberg that they are facing substantial issues due to the recent weakness in the Japanese Yen. A boom in tourism is also putting pressure on local inflation. 
  • Japanese markets are closed on Friday for the Greenery Day bank holiday. 
  • Equities are trading in the green with both European indexes and US Futures up near 0.5% on average.
  • The CME Fedwatch Tool suggests an 85.5% probability that June will still see no change to the Federal Reserve’s fed fund rate. Odds of a rate cut in July are also broadly out of the cards, while for September the tool shows a 60% chance that rates will be lower than current levels.
  • The benchmark 10-year US Treasury Note trades around 4.57%, the lowest level this week, while Japanese 10-year JGB are trading at the high for this week near 0.889%.

USD/JPY Technical Analysis: Dollar buyers will be trembling to get in

The USD/JPY pair has still some room to fall, though a very lucrative entry level for Dollar bulls is just around the corner. Around 152.00, not only a pivotal level and the 55-day Simple Moving Average (SMA) is nearby, but also there is a long-term ascending trend line just beneath to provide support. This makes it the perfect entry level for any US Dollar buyers who foresee USD/JPY heading back to 160.00.

USD/JPY (daily chart)

USD/JPY (daily chart)

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