USD/JPY Makes Modest Recovery as US Inflation Cools...
USD/JPY Makes Modest Recovery as US Inflation Cools
The USD/JPY pair showed signs of life during the mid-North American session, marking a modest recovery to around 149.40, gaining 0.12% against the Japanese Yen (JPY). This turnaround came after a dip that took the pair to a daily low of 148.52 during the Asian and European sessions.
One of the key factors influencing this rebound was the release of US Core Personal Consumption Expenditures (PCE) data, which serves as the US Federal Reserve's preferred indicator for inflation. The data showed a 3.9% year-on-year increase, slightly below the anticipated 4%. Similarly, headline inflation in the US grew by 3.5% year-on-year, in line with expectations but slightly above July's figure of 3.4%.
The muted inflation figures provided room for cautious optimism in the market, as it eased concerns about an overly aggressive tightening of monetary policy by the Federal Reserve. While some Fed officials have stressed the need for further tightening, others are adopting a more measured approach. This has led to reduced expectations of a rate hike in November, as indicated by the CME FedWatch Tool.
On another note, the University of Michigan's Consumer Sentiment index for September's final reading showed a slight deterioration, while inflation expectations in the US increased to 3.2% from 3.1% for the one-year outlook. Long-term inflation expectations also saw a modest uptick to 2.8% on a five-year horizon, up from 2.7%.
Turning to the Japanese Yen, the forex market remained abuzz with intervention threats from Japanese authorities. These threats, however, seemed at odds with official statements emphasizing that any moves in the forex market should be justified by fundamentals. Despite the intervention rhetoric, the Bank of Japan (BoJ) maintained a dovish stance, indicating that further weakness in the JPY could be justified.
BoJ Governor Kazuo Ueda highlighted that discussing an exit from the ultra-loose monetary policy would be premature, particularly given that inflation above 2% is not being driven by wage growth.
Japanese Finance Minister Shunichi Suzuki reiterated the country's stance, refusing to rule out any measures in response to excessive forex market volatility. He stressed the government's vigilant monitoring of forex movements with a sense of urgency.
In light of these fundamental factors, the USD/JPY pair may approach the 150.00 mark, but intervention threats could deter buyers from initiating fresh long positions. The currency pair's outlook remains influenced by a delicate balance between economic data and intervention rhetoric, making it a closely watched pair in the forex market.
Our preference
Above 148.20 look for further upside with 149.50 & 150.00 as targets.
The USD/JPY pair showed signs of life during the mid-North American session, marking a modest recovery to around 149.40, gaining 0.12% against the Japanese Yen (JPY). This turnaround came after a dip that took the pair to a daily low of 148.52 during the Asian and European sessions.
One of the key factors influencing this rebound was the release of US Core Personal Consumption Expenditures (PCE) data, which serves as the US Federal Reserve's preferred indicator for inflation. The data showed a 3.9% year-on-year increase, slightly below the anticipated 4%. Similarly, headline inflation in the US grew by 3.5% year-on-year, in line with expectations but slightly above July's figure of 3.4%.
The muted inflation figures provided room for cautious optimism in the market, as it eased concerns about an overly aggressive tightening of monetary policy by the Federal Reserve. While some Fed officials have stressed the need for further tightening, others are adopting a more measured approach. This has led to reduced expectations of a rate hike in November, as indicated by the CME FedWatch Tool.
On another note, the University of Michigan's Consumer Sentiment index for September's final reading showed a slight deterioration, while inflation expectations in the US increased to 3.2% from 3.1% for the one-year outlook. Long-term inflation expectations also saw a modest uptick to 2.8% on a five-year horizon, up from 2.7%.
Turning to the Japanese Yen, the forex market remained abuzz with intervention threats from Japanese authorities. These threats, however, seemed at odds with official statements emphasizing that any moves in the forex market should be justified by fundamentals. Despite the intervention rhetoric, the Bank of Japan (BoJ) maintained a dovish stance, indicating that further weakness in the JPY could be justified.
BoJ Governor Kazuo Ueda highlighted that discussing an exit from the ultra-loose monetary policy would be premature, particularly given that inflation above 2% is not being driven by wage growth.
Japanese Finance Minister Shunichi Suzuki reiterated the country's stance, refusing to rule out any measures in response to excessive forex market volatility. He stressed the government's vigilant monitoring of forex movements with a sense of urgency.
In light of these fundamental factors, the USD/JPY pair may approach the 150.00 mark, but intervention threats could deter buyers from initiating fresh long positions. The currency pair's outlook remains influenced by a delicate balance between economic data and intervention rhetoric, making it a closely watched pair in the forex market.
Above 148.20 look for further upside with 149.50 & 150.00 as targets.
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