The Japanese Yen (JPY) strengthened against the US Dollar (USD) on Thursday, reaching 161.00, as US markets remained closed for a public holiday. This rebound follows a successful 30-year Japanese government bond auction, easing concerns about the Bank of Japan’s (BoJ) potential exit from its bond-buying program.
Market Drivers: BoJ Speculation and US Economic Slowdown
- BoJ Policy Shift: A research note by RBC BlueBay Asset Management highlighted the possibility of the BoJ announcing a larger-than-expected reduction in bond purchases, along with a potential rate hike. This hawkish scenario could trigger a substantial Yen rally.
- US Economic Slowdown: Weaker-than-expected US economic data released on Wednesday, including ADP employment and ISM Services PMI figures, has fueled expectations of a US economic slowdown, weighing on the USD.
- Rate Hike Expectations: Swap traders are increasingly pricing in another rate hike by the BoJ on July 31st, further supporting the Yen’s recovery.
Technical Analysis: USD/JPY Correction Looms, Key Support Levels in Focus
The USD/JPY pair is showing signs of an impending correction, with the Relative Strength Index (RSI) in overbought territory. The first support level to watch is 160.32, followed by the 55-day Simple Moving Average (SMA) at 157.03 and the 100-day SMA at 154.26.
Key Takeaways:
- The Japanese Yen is rebounding from its recent lows, driven by a successful bond auction and growing anticipation of a BoJ policy shift.
- The US Dollar is weakening on the back of softer economic data and expectations of Fed rate cuts.
- The USD/JPY pair faces potential correction, with key support levels to watch for further downside movement.