USDJPY encounters new supply and is pushed down by a lower USD.
The USDJPY pair struggles to benefit on the previous day’s rally from the 145.55 region. Or the weekly bottom, and comes under additional selling pressure during Thursday’s Asian session. Spot prices are now trading slightly over the round number of 146.00. Down more than 0.10% for the day, and might fall further in the aftermath of a lower tone around the US Dollar (USD).
The USD bulls are on the defensive as the Fed is expected to pause in September.
Indeed, the USD Index(DXY), which monitors the US dollar against a basket of currencies, is trading around a two-week low. After poor US macro data was revealed on Wednesday. According to a report released by Automatic Data Processing (ADP). Private sector employment in the United States increased by 177K in August, compared to the 195K expected. And the prior month’s downwardly revised number of 324K. Furthermore, US 2 GDP growth was cut down to 2.1% annualized rate from 2.4% originally predicted. Reinforcing predictions that the Federal Reserve (Fed) will stop its rate-hiking cycle in September.
This, in turn, led to a dramatic drop in US Treasury bond rates overnight and continues to weaken the buck, which is considered as a negative indicator. The USDJPY pair is under pressure.
The policy difference between the Fed and the BoJ helps to contain USDJPY losses ahead of the important US PCE Price Index.
Markets are still pricing in another 25 basis point Fed rate rise before the end of the year. The Bank of Japan, on the other hand, is anticipated to maintain its ultra-loose monetary policy settings. As a result, USDJPY traders may be discouraged from putting strong bearish bets around the major. It is worth noting that Bank of Japan Governor Kazuo Ueda stated last week that underlying inflation in Japan remained somewhat below the 2% target, implying that the central bank may maintain the status quo until next summer.
Meanwhile, Japan’s Ministry of Economy, Trade, and Industry stated that Industrial Production decreased by 2.0% MoM in July. Below market estimates of a 1.4% decline and a 1.4% increase. The prior month’s increase was 2.4%. The disappointment,was partially offset by the announcement of better-than-expected Japanese Retail Sales figures. Which increased by 6.8% year on year in July, up from 5.6% before. The data provides no impetus to the USDJPY pair, as the market remains focused on the publication of the US Core PCE Price Index – the Fed’s preferred inflation measure – and the Weekly Initial Jobless Claims, both of which are coming later in the early North American session.
