The USD/JPY currency pair experienced a fluctuation of nearly 20 pips in seesaw momentum following the repetition of Federal Reserve (Fed) Chairman’s comments on early Thursday morning in Europe. Consequently, the Yen pair briefly reached its highest levels since November 2022, only to retreat from 144.70 and settle around 144.60.
During the Fourth Conference on Financial Stability hosted by the Bank of Spain in Madrid, Fed Chair Jerome Powell reiterated that a majority of Fed policymakers anticipate two or more rate hikes by the end of the year. Notably, Powell’s mention of potential credit condition tightening resulting from bank stresses that emerged in March appeared to trigger the retreat of the USD/JPY pair from its multi-day peak.
The Yen pair’s buyers were also encouraged by positive data from Japan. Japan’s Consumer Confidence Index for June matched the forecast of 36.2, slightly surpassing the previous estimate of 36.0. Additionally, Japan’s Retail Trade growth for May recorded a year-on-year increase of 5.7%, surpassing the expected 5.4% and the revised 5.1% from the previous period.
Concerns regarding possible intervention by the Japanese government to protect the Yen further fueled optimism among USD/JPY bulls, as policymakers have recently demonstrated readiness to intervene if necessary.
However, the USD/JPY buyers remained hopeful due to dovish comments made by Bank of Japan (BoJ) Governor Kazuo Ueda and positive US Treasury bond yields. BoJ’s Ueda emphasized that the goal of achieving 2% inflation accompanied by sufficient wage growth still requires more progress.
He also mentioned that the Japanese economy is expected to slightly exceed its potential for a period of time. Meanwhile, the US 10-year and two-year Treasury bond yields consolidated their losses from the previous day, hovering around 3.48% and 4.75%, respectively.
Looking ahead, traders of the USD/JPY pair will closely monitor the revised version of the US Gross Domestic Product (GDP) for the first quarter of 2023, as well as second-tier US employment and activity data, to gain clearer insights and direction.
Technical analysis reveals that USD/JPY remains within a bullish channel that has been in place for two weeks, currently ranging between 143.85 and 145.50, providing continued optimism for buyers of the Yen pair.
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