The Japanese Yen (JPY) strengthened against both the US Dollar (USD) and the Euro (EUR) during Asian trading hours on Thursday, driven by a combination of verbal intervention warnings from Japanese authorities and softer US inflation data [1][3]. The USD/JPY pair fell to near 162.15, with Japan’s Finance Minister Satsuki Katayama stating that authorities are ready to take appropriate action on currency as needed, and will monitor market trends and economic data to ensure fiscal sustainability [3]. This heightened alert for intervention contributed to the Yen’s appreciation.
US inflation data released on Wednesday showed the Producer Price Index (PPI) fell 0.3% in June, compared to a revised 0.6% rise in the previous month [2]. According to another source, the PPI rose by 5.5% YoY in June, versus 6.0% in May (revised from 6.5%), coming in below the market consensus of 6.2% [3]. This softer inflation reinforced expectations that the US Federal Reserve (Fed) can remain patient on interest rate hikes, with the probability for a July rate hike slashed to 9.6%, down from 45% at the start of the week [3]. Markets still see even odds of at least a 25 basis points (bps) increase in September [3].
The US Dollar Index (DXY) consolidated around 100.50, close to a four-week low, as receding Fed rate hike expectations favored USD bears [2]. However, energy-driven inflation fears and escalating US-Iran tensions, including new airstrikes and threats to critical infrastructure, helped limit further losses for the USD [2]. The US Dollar was the strongest against the Japanese Yen this week, with a 0.21% gain, but lost ground against other major currencies [2].
Meanwhile, the EUR/JPY cross depreciated after three days of gains, trading around 185.90. Technical analysis shows EUR/JPY positioned near the upper boundary of an ascending triangle around 186.10, indicating bullish pressure and a potential breakout above resistance. A decisive daily close above this level could expose the all-time high of 187.95, recorded on April 17 [1]. On the downside, primary support lies at the nine-day EMA at 185.35, followed by the 50-day EMA at 185.05, with further declines potentially testing the four-month low of 181.87 and the six-month low of 180.81 [1]. The Euro was the weakest against the Japanese Yen today [1].
CONCLUSION
The Japanese Yen’s strength, fueled by intervention warnings and cooling US inflation, has pressured both USD and EUR crosses. While the USD faces headwinds from softer inflation and reduced rate hike expectations, geopolitical tensions are providing some support. Technical signals suggest EUR/JPY is at a critical resistance level, with potential for a breakout or further declines. Overall, market sentiment is cautious, with high impact expected as traders await further US macroeconomic data and monitor Japanese intervention risks.