USD/JPY Daily Chart Analysis – 2024-07-10

After a brief recovery, the Japanese yen is once again weakening against the US dollar, with USD/JPY now aiming for the 162 level after maintaining support at 160.25, its pre-intervention peak. As long as market volatility stays low, yen-funded carry trades remain attractive. There’s potential for USD/JPY to rise further due to the reduced likelihood of intervention, although a sharp move to 165 could alter this scenario.

Ahead of the Bank of Japan’s July meeting, some bond market participants have proposed reducing monthly bond purchases to around 2-3 trillion yen from the current 6 trillion yen commitment. While this significant tapering is widely expected, its impact on the yen is anticipated to be minimal, keeping the currency’s downtrend in place.

Federal Reserve Chair Jerome Powell recently provided no new insights into the monetary policy outlook, reiterating that more positive data is needed to support a rate cut. This was somewhat disappointing for those hoping for a clearer easing signal, especially after a spate of soft US economic data. Consequently, both US Treasury yields and USD/JPY have drifted higher, though a breakout from current ranges is unlikely before the US inflation data release on 11 July.

USD/JPY is currently up 0.3%, with bulls targeting the 162 mark. Powell’s comments were in line with expectations, disappointing those looking for a dovish shift. The upcoming CPI report will play a crucial role in influencing market pricing. The pair is set to close above the 200-hour moving average (161.13), providing support for long positions. However, resistance is expected at 161.90-162 ahead of the CPI release, while support at 160.25 should hold in the near term. The low-volatility environment continues to support interest in yen-funded carry trades.