USD/JPY Faces Intervention Risk; BoJ Rate Hike Possible

Quick Look:

  • Economic Data Impact: Retail sales and inflation data may signal a BoJ rate hike in July.
  • USD/JPY Movement: Struggles to breach JPY160; potential interventions around JPY159.50.
  • US Influences: US housing data and FOMC speeches could influence USD/JPY.

The Japanese Yen takes centre stage as the USD/JPY pair hovers within the intervention zone. Key economic data releases on Thursday and Friday may significantly alter USD/JPY’s trajectory, especially if the Bank of Japan (BoJ) hints at a potential rate hike in July.

USD/JPY Impacted by BoJ and Government Actions

Wednesday, June 26:

The Bank of Japan and the Japanese government will likely influence buyer demand for USD/JPY. Previous interventions in April and May saw the currency pair drop from 160.209 to below 152 before retracing to 159. This week, USD/JPY has struggled to breach the resistance at 160 due to potential intervention threats.

Thursday, June 27:

Forecasts suggest Japanese retail sales will increase by 2.0% year-on-year for May, down from 2.4% in April. Better-than-expected retail sales could indicate a July rate hike by the BoJ. An upward trend in consumer spending might fuel demand-driven inflation, potentially influencing BoJ policy decisions.

Friday, June 28:

Projections indicate the Tokyo core annual inflation rate will rise from 1.9% to 2.0% in June, while the overall annual inflation rate is expected to increase from 2.2% to 2.4%. Steady labour market data, reflected in an unchanged unemployment rate, could support a potential rate hike in July. Additionally, the BoJ will consider the impact of a weaker Yen on the broader Japanese economy.

USD/JPY Trading Near JPY160 with Intervention Risks

USD/JPY traded between JPY159.20 and JPY159.75 the previous day. During the European morning, the pair tentatively pushed above JPY160. Support emerged around the five-day moving average, approximately JPY159.20, a level it hasn’t closed below since June 6. The high in late April, just above JPY160.15, is also critical. Intervention efforts seem to start around JPY159.50.

The US Dollar has risen in 12 of the past 15 sessions, gaining in eight of the last nine. One-month implied volatility peaked over 9% on Monday, eased to about 8.35% on Tuesday, and shows a slight increase today.

US Housing Data and FOMC Speeches Affect USD/JPY

The US housing sector data and speeches from Federal Open Market Committee (FOMC) members also play pivotal roles. Significant developments in these areas could further influence USD/JPY movements.

Overall, intervention risks, BoJ rate hike signals, and upcoming economic data releases create a complex landscape for USD/JPY, requiring close attention from market participants.

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