The Japanese Yen (JPY) plunged to a fresh multi-decade low against the US Dollar (USD) on Friday, briefly touching 161.27 before retracing slightly. This renewed weakness comes despite warnings from Japanese Finance Minister Shun’ichi Suzuki, whose repeated assurances of vigilance are now being met with skepticism by the markets.
Market Drivers: Intervention Anticipation and Fed Expectations
- Japanese Intervention in Focus: The Yen’s relentless decline has fueled expectations of imminent intervention by Japanese authorities. However, markets are demanding action rather than words, pushing the government into a corner.
- Fed Rate Cut Bets: The US Dollar remains strong, supported by the prospect of further Fed rate cuts. This, coupled with the Yen’s weakness, is driving the USD/JPY pair higher.
- Mixed US Economic Data: While Thursday’s US economic data, including Durable Goods Orders and Pending Home Sales, were underwhelming, traders are now eagerly awaiting Friday’s Personal Consumption Expenditures (PCE) data for May, the Fed’s preferred inflation gauge.
- Global Equity Rebound: Despite the Yen’s weakness, global equity markets are rallying, led by a rebound in Nvidia shares.
Technical Analysis: USD/JPY Soaring, Correction Potential Limited
The USD/JPY pair is clearly in a bullish trend, but the Relative Strength Index (RSI) is flashing overbought signals, suggesting a potential correction could be on the horizon. However, even if the PCE data comes in softer than expected, the 55-day and 100-day SMAs at 156.53 and 153.81 respectively, could provide strong support and limit any significant pullback.
Key Takeaways:
- The Japanese Yen is at a multi-decade low, increasing pressure on the government to intervene.
- The US Dollar remains strong, fueled by expectations of further Fed rate cuts.
- The upcoming US PCE data will be crucial for determining the next move in the USD/JPY pair.
- Technical analysis suggests a potential correction, but strong support levels could limit the downside.