The Japanese Yen (JPY) continued its winning streak for the fourth consecutive session, fueled by rising real wages in July and speculation that the Bank of Japan (BoJ) may hike interest rates before the end of 2024. Meanwhile, the USD/JPY pair faced headwinds from a softening US Dollar (USD) due to dovish comments from Federal Reserve (Fed) officials.
BoJ Board Member Hajime Takata’s statement on Thursday, suggesting a multi-stage adjustment to policy rates if economic and inflation forecasts align, bolstered the yen. Takata also highlighted a moderately recovering domestic economy, while acknowledging recent market volatility.
Traders are looking ahead to Friday’s US Nonfarm Payrolls (NFP) report for clues on the magnitude of an expected Fed rate cut this month.
Fed Dovishness Weighs on USD
Several Fed officials have signaled a shift towards easing monetary policy. Chicago Fed President Austan Goolsbee indicated a near-term easing of interest rates, while San Francisco Fed President Mary Daly emphasized the need for rate cuts due to slowing inflation and economic growth. Atlanta Fed President Raphael Bostic, while acknowledging a favorable position, cautioned against maintaining restrictive policy for too long.
Economic Indicators
The US ADP Employment Change report showed a slowdown in private-sector job growth in August, while initial jobless claims rose slightly. Japan’s Labor Cash Earnings, however, soared by 3.6% year-on-year, the highest since January 1997.
Technical Outlook
The USD/JPY pair is currently trading around 143.30, with technical indicators suggesting a persistent bearish trend. The pair is approaching a seven-month low of 141.69, with support also seen at 140.25. Resistance is expected at the nine-day EMA (144.60) and the 21-day EMA (146.02).
The Japanese Yen’s strength and the USD’s weakness will continue to be influenced by upcoming economic data releases and further commentary from central bank officials.
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