Japanese Yen recovers losses ahead of Fed Powell’s second testimony

• 
  The
  Japanese
  Yen
  struggles
  as
  the
  US
  Dollar
  gains
  momentum
  after
  Fed
  Chair
  Jerome
  Powell’s
  testimony
  on
  Tuesday.
• 
  The
  Bank
  of
  Japan
  is
  poised
  to
  assess
  a
  viable
  strategy
  for
  scaling
  back
  its
  government
  bond
  purchases.
• 
  Powell
  stated
  that
  a
  rate
  cut
  is
  not
  appropriate
  until
  the
  Fed
  gains
  confidence
  that
  inflation
  is
  moving
  toward
  2%.

The
Japanese
Yen
(JPY)
depreciates
for
the
third
successive
session
on
Wednesday.
The
rise
in
the

USD/JPY
pair
is
driven
by
the
strengthening
US
Dollar
(USD),
which
gained
momentum
after

Federal
Reserve
Chairman
Jerome
Powell’s
testimony
before
the
US
Congress
on
Tuesday.
Powell
noted
improved
inflation
figures
but
maintained
the
Fed’s
cautious
approach.

The
Bank
of
Japan
(BoJ)
may
raise
interest
rates
during
its
July
meeting
and
unveil
plans
to
taper
its
bond
purchases.
On
Tuesday,
Japan’s
Finance
Minister
Shunichi
Suzuki
underscored
the
significance
of
maintaining
fiscal
discipline
to
bolster
confidence
in
long-term
fiscal
health.
Suzuki
also
mentioned
monitoring
closely
the
discussions
at
the

BoJ
meeting
concerning
the
bond
market,
as
reported
by
Reuters.

Traders
anticipate
several
key
events
in
the
financial
markets.
These
include
Fed
Chair
Jerome
Powell’s
second
semi-annual
testimony,
speeches
by
Fed
officials
Michelle
Bowman
and
Austan
Goolsbee,
and
the
release
of
US
Consumer
Price
Index
(CPI)
data
scheduled
for
Thursday.

Daily
Digest
Market
Movers:
Japanese
Yen
declines
due
to
the
hawkish
stance
of
Fed’s
Powell

• Japan’s
  Producer
  Price
  Index
  (YoY)
  rose
  by
  2.9%
  in
  June,
  accelerating
  from
  an
  upwardly
  revised
  2.6%
  increase
  in
  the
  previous
  month,
  in
  line
  with
  market
  expectations.
  This
  marks
  the
  41st
  consecutive
  month
  of
  rise
  in
  producer
  inflation
  and
  represents
  the
  highest
  level
  since
  August
  2023.
• Fed
  Chair
  Jerome
  Powell
  stated
  in his
  Congressional
  testimony
  on
  Tuesday,
  “More
  good
  data
  would
  strengthen
  our
  confidence
  in
  inflation.”
  Powell
  emphasized
  that
  a
  “Policy
  rate
  cut
  is
  not
  appropriate
  until
  the
  Fed
  gains
  greater
  confidence
  that
  inflation
  is
  headed
  sustainably
  toward
  2%.”
  He
  also
  noted
  that
  “first-quarter
  data
  did
  not
  support
  the
  greater
  confidence
  in
  the
  inflation
  path
  that
  the
  Fed
  needs
  to
  cut
  rates.”
• According
  to
  a
  Bloomberg
  report
  on
  Tuesday,
  the
  Bank
  of
  Japan
  is
  conducting
  three
  in-person
  meetings
  with
  banks,
  securities
  firms,
  and
  financial
  institutions
  over
  the
  next
  few
  days.
  The
  purpose
  of
  these
  meetings
  is
  to
  assess
  a
  feasible
  pace
  for
  scaling
  back
  its
  purchases
  of
  Japanese
  Government
  Bonds.
• The
  Japanese
  Yen
  struggles
  due
  to
  overseas
  asset
  purchases
  by
  Japanese
  individuals
  through
  the
  newly
  revamped
  tax-free
  investment
  scheme,
  the
  Nippon
  Individual
  Savings
  Account
  (NISA)
  program.
  According
  to
  Nikkei
  Asia,
  the
  scale
  of
  these
  purchases
  is
  expected
  to
  exceed
  the
  country’s
  trade
  deficit
  during
  the
  first
  half
  of
  this
  year.
• Japan’s
  Ministry
  of
  Finance
  reported
  on
  Monday
  that
  Japanese
  investment
  trust
  management
  companies
  and
  asset
  management
  firms
  bought
  ¥6.16
  trillion
  ($38
  billion)
  more
  in
  offshore
  equities
  and
  investment
  fund
  shares
  than
  they
  sold
  during
  the
  first
  six
  months
  of
  the
  year.
• On
  Monday,
  the
  Bank
  of
  Japan
  (BOJ)
  maintained
  its
  economic
  assessment
  for
  five
  of
  Japan’s
  nine
  regions
  in
  its
  latest
  ‘Sakura
  Report’.
  The
  assessment
  for
  two
  regions
  was
  raised,
  while
  it
  was
  lowered
  for
  another
  two
  regions
  in
  the
  report
  released
  on
  Monday.
  Regarding
  price
  trends,
  the
  BoJ
  noted
  that
  many
  regions
  report
  wage
  hikes
  spreading
  among
  smaller
  firms.

Technical
Analysis:
USD/JPY
rises
to
near
161.50

USD/JPY
trades
around
161.50
on
Wednesday.
The
pair
is
maintaining
its
upward
trajectory
within
an
ascending
channel
pattern,
suggesting
a
bullish
bias
according
to
daily
chart
analysis.
Adding
to
this
bullish

outlook,
the
14-day
Relative
Strength
Index
(RSI)
remains
above
the
50
level,
reinforcing
the
strength
of
the
upward
trend.

Looking
ahead,
the
USD/JPY
pair
may
target
a
critical
resistance
level
near
162.70,
positioned
at
the
upper
boundary
of
the
ascending
channel.
A
successful
breakout
above
this
level
could
bolster
bullish
sentiment,
potentially
propelling
the
pair
toward
the
psychological
resistance
at
163.00.

On
the
downside,
initial
support
for
the
USD/JPY
pair
is
anticipated
around
the
21-day
Exponential
Moving
Average
(EMA)
at
159.96.
A
breach
below
this
level
might
exert
pressure,
prompting
a
test
of
the
lower
boundary
of
the
ascending
channel
around
159.60.
Further
decline
below
this
channel
support
could
lead
the
pair
toward
the
vicinity
of
June’s
low
at
154.55.

USD/JPY:
Daily
Chart