On Friday, the USDJPY pair draws some sellers for the second straight day. It holds the 144.00 level throughout the Asian session. However, spot prices remain above a one and a half week low, around the 143.55 region recorded on Thursday. And any significant corrective slide continues to elude them.
Fears of an intervention and the risk-off mindset favor the USDJPY and serve as a headwind.
Investors’ morale is still suffering due to concerns over economic headwinds brought on by quickly rising borrowing rates. As well as the deteriorating US-China ties, as seen by the generally softer tone in the equity markets. Aside from that, the possibility of Japanese government involvement strengthens the safe-haven Japanese Yen (JPY). And puts pressure on the USDJPY pair. The US Dollar (USD), on the other hand, has halted the overnight retracement of its fall from its high since June 12. Furthermore, a significant difference in the monetary policy stances of the Bank of Japan (BoJ). And the Federal Reserve (Fed) could assist limit the major’s downside for the time being.
The bullish US ADP data issued on Thursday supported the predictions, showing that private-sector companies gained 497K jobs in June, well above the 267K observed a month earlier and beyond even the most optimistic expectations. As an indication of future economic strength, The US ISM Serices PMI rose more than predicted in June, to 53.9 from 50.3 the previous month, despite the Prices Paid sub-component – an indicator of inflation – falling to more than three-year lows. Nonetheless, the stories eclipsed statistics revealing that Weekly Initial Jobless Claims climbed more than expected, to 248K last week from 236K, while JOLTS Job Openings for May fell short of estimates.
Prior to the important US NFP data, the Fed-BoJ policy divergence helps limit the downside.
Investors appear to believe that the Bank of Japan’s negative interest-rate policy would be maintained at least until next year. Furthermore, as published by the Nikkei newspaper on Friday. BoJ Deputy Governor Shinichi Uchida stated that the Bank of Japan will retain its yield curve management. From the standpoint of maintaining ultra-easy monetary conditions. This, in turn, puts a damper on speculation of a shift in the BoJ’s policy stance. Which had been encouraged by statistics showing that Japan’s nominal base wage increased. At the quickest rate in 28 years in May. This might raise inflation. Which has been above the 2% target for more than a year. The Fed, on the other hand, is largely projected to raise interest rates by 25 basis points. At its forthcoming policy meeting on July 25-26.
The aforementioned fundamental backdrop appears to be solidly biased in favor of USD bulls, supporting potential for some dip-buying in the USDJPY pair. Traders, on the other hand, are hesitant and prefer to remain on the sidelines ahead of Friday’s release of the much-awaited US monthly employment figures. The well publicized NFP report is coming later in the year. The North American session will be crucial in shaping USD price dynamics and allowing traders to capitalize on short-term chances on the last day of the week.
