With the intensive release of US data, will the Japanese yen continue to depreciate?
2025-07-30 17:32:54
The USD/JPY pair fell 0.33% during early European trading on Wednesday, July 30th, retreating from this week's high of 148.80 to 147.96. Combined with the dollar's general weakness against a broad basket of currencies, the USD/JPY pair remains under pressure below the 148.00 level. Tonight's Federal Reserve meeting and Thursday's Bank of Japan policy meeting have tightened market nerves, supporting the yen's safe-haven status. However, with expectations of an imminent Bank of Japan rate hike waning, significant appreciation of the yen appears unlikely.
The flurry of US economic data releases is drawing attention . Optimism surrounding recent trade agreements with Japan and the EU could pose headwinds for the USD/JPY pair. On the other hand, the market's growing acceptance that the Federal Reserve will maintain high interest rates for an extended period could provide support for the USD/JPY pair, limiting its decline. Ahead of tonight's Fed meeting, attention will focus on the US ADP private sector employment report, followed by the preliminary second-quarter GDP report on Wednesday, various US PMIs and personal consumption expenditures (PCE) on Thursday, and the non-farm payrolls (NFP) report on Friday.
Meanwhile, the U.S. Bureau of Labor Statistics (BLS) reported in its Job Openings and Labor Turnover Survey (JOLTS) on Tuesday that the number of job openings on the last working day of June was 7.43 million. This was lower than the downwardly revised 7.71 million in the previous month and below market expectations of 7.55 million, indicating a slowdown in the labor market. Separately, the Conference Board's consumer confidence index rose to 97.2 in July from 95.2 in the previous month, indicating positive consumer sentiment. This could translate into increased consumer spending, playing a significant role in stimulating economic activity, driving the dollar's strong rebound in overnight trading to its highest level since June 23.
The Bank of Japan may suspend interest rate hikes, adding uncertainty to Japan's political situation
Investors are choosing to wait and see ahead of key central bank events this week, as evidenced by the weak tone of the Nikkei 225, driving flows to the safe-haven Japanese yen during Wednesday's Asian trading session. However, significant appreciation of the yen appears elusive as expectations for an imminent Bank of Japan rate hike have diminished.
Data released last Friday showed that consumer inflation in Japan's capital, Tokyo, slowed more than expected in July. Furthermore, the defeat of Japan's ruling coalition, the Liberal Democratic Party (LDP) and its junior partner, Komeito, in upper house elections earlier this month has added uncertainty to markets and could further complicate the Bank of Japan's path to normalization.
In fact, Japan's ruling coalition reached an agreement with the four main opposition parties on Wednesday (July 30) to abolish the temporary gasoline tax as early as this year, as it succumbed to opposition pressure after its crushing defeat in the general election.
Policy signals from the US and Japanese central banks become the focus
Despite growing political pressure on the Federal Reserve to cut interest rates to lower borrowing costs, the central bank is expected to keep interest rates within a range of 4.25% to 4.50% at the end of its two-day meeting on Wednesday. Investors will therefore be closely watching the accompanying policy statement and Fed Chairman Jerome Powell's remarks at the post-meeting press conference for clues on the path of future rate cuts.
The Bank of Japan will also announce its policy decision on Thursday and is expected to pause its rate hikes. However, the Bank of Japan may offer a more positive policy outlook due to last week's trade agreement with the United States and hint that it may resume rate hikes later this year. Comments from Bank of Japan Governor Kazuo Ueda will be in focus as investors hope that the recent trade agreement between Japan and the United States will pave the way for the central bank to raise interest rates again this year.
Technical Analysis
USD/JPY may have bargain hunting opportunities in the near term, with good support around the 147.00 round number. Any subsequent decline is likely to find good support around the 147.75-147.70 area. If it falls below this area, the USD/JPY currency pair may test the 147.00 round number and then fall to the 100-day EMA, currently around the 146.63 area. The latter coincides with last week's swing low. A decisive break below this level could turn the short-term trend bearish and cause the currency pair to retest the level below 146.00.
On the other hand, the area around 148.50 and the 148.80 area near the overnight swing high now appear to be acting as immediate resistance. This is followed by the 149.00-149.10 area, representing the monthly high, and the all-important 200EMA, located around the 147.92 area. A sustained hold above the 200EMA would be seen as a sign of strength for USD/JPY bulls and pave the way for a retest of the psychological 150.00 level.
(USD/JPY daily chart, source: Yihuitong)
At 17:15 Beijing time, the USD/JPY exchange rate was 147.89/90
The flurry of US economic data releases is drawing attention . Optimism surrounding recent trade agreements with Japan and the EU could pose headwinds for the USD/JPY pair. On the other hand, the market's growing acceptance that the Federal Reserve will maintain high interest rates for an extended period could provide support for the USD/JPY pair, limiting its decline. Ahead of tonight's Fed meeting, attention will focus on the US ADP private sector employment report, followed by the preliminary second-quarter GDP report on Wednesday, various US PMIs and personal consumption expenditures (PCE) on Thursday, and the non-farm payrolls (NFP) report on Friday.
Meanwhile, the U.S. Bureau of Labor Statistics (BLS) reported in its Job Openings and Labor Turnover Survey (JOLTS) on Tuesday that the number of job openings on the last working day of June was 7.43 million. This was lower than the downwardly revised 7.71 million in the previous month and below market expectations of 7.55 million, indicating a slowdown in the labor market. Separately, the Conference Board's consumer confidence index rose to 97.2 in July from 95.2 in the previous month, indicating positive consumer sentiment. This could translate into increased consumer spending, playing a significant role in stimulating economic activity, driving the dollar's strong rebound in overnight trading to its highest level since June 23.
The Bank of Japan may suspend interest rate hikes, adding uncertainty to Japan's political situation
Investors are choosing to wait and see ahead of key central bank events this week, as evidenced by the weak tone of the Nikkei 225, driving flows to the safe-haven Japanese yen during Wednesday's Asian trading session. However, significant appreciation of the yen appears elusive as expectations for an imminent Bank of Japan rate hike have diminished.
Data released last Friday showed that consumer inflation in Japan's capital, Tokyo, slowed more than expected in July. Furthermore, the defeat of Japan's ruling coalition, the Liberal Democratic Party (LDP) and its junior partner, Komeito, in upper house elections earlier this month has added uncertainty to markets and could further complicate the Bank of Japan's path to normalization.
In fact, Japan's ruling coalition reached an agreement with the four main opposition parties on Wednesday (July 30) to abolish the temporary gasoline tax as early as this year, as it succumbed to opposition pressure after its crushing defeat in the general election.
Policy signals from the US and Japanese central banks become the focus
Despite growing political pressure on the Federal Reserve to cut interest rates to lower borrowing costs, the central bank is expected to keep interest rates within a range of 4.25% to 4.50% at the end of its two-day meeting on Wednesday. Investors will therefore be closely watching the accompanying policy statement and Fed Chairman Jerome Powell's remarks at the post-meeting press conference for clues on the path of future rate cuts.
The Bank of Japan will also announce its policy decision on Thursday and is expected to pause its rate hikes. However, the Bank of Japan may offer a more positive policy outlook due to last week's trade agreement with the United States and hint that it may resume rate hikes later this year. Comments from Bank of Japan Governor Kazuo Ueda will be in focus as investors hope that the recent trade agreement between Japan and the United States will pave the way for the central bank to raise interest rates again this year.
Technical Analysis
USD/JPY may have bargain hunting opportunities in the near term, with good support around the 147.00 round number. Any subsequent decline is likely to find good support around the 147.75-147.70 area. If it falls below this area, the USD/JPY currency pair may test the 147.00 round number and then fall to the 100-day EMA, currently around the 146.63 area. The latter coincides with last week's swing low. A decisive break below this level could turn the short-term trend bearish and cause the currency pair to retest the level below 146.00.
On the other hand, the area around 148.50 and the 148.80 area near the overnight swing high now appear to be acting as immediate resistance. This is followed by the 149.00-149.10 area, representing the monthly high, and the all-important 200EMA, located around the 147.92 area. A sustained hold above the 200EMA would be seen as a sign of strength for USD/JPY bulls and pave the way for a retest of the psychological 150.00 level.
(USD/JPY daily chart, source: Yihuitong)
At 17:15 Beijing time, the USD/JPY exchange rate was 147.89/90
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