04/09/24

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The Japanese Yen has shown signs of appreciation against the US Dollar following the release of the Jibun Bank Services PMI data, which was reported at 53.7 for August, slightly revised from an initial estimate of 54.0. This figure indicates ongoing expansion in Japan’s service sector, marking the seventh consecutive month of growth, although it has remained unchanged since July.

Japan’s Chief Cabinet Secretary Yoshimasa Hayashi has indicated a heightened vigilance regarding both domestic and international market trends. He highlighted the necessity of coordinating fiscal and economic policy management with the Bank of Japan, noting the importance of a measured response to market fluctuations while refraining from commenting on daily stock price movements.

On the other hand, the US Dollar is maintaining its strength as market participants wait for the upcoming employment data, specifically the Nonfarm Payrolls report for August. Insights from this data could influence expectations concerning the timeline and magnitude of potential interest rate cuts by the Federal Reserve.

In recent developments, Japan announced a significant financial package of ¥989 billion aimed at supporting energy subsidies amid rising costs and inflationary pressures on households. Meanwhile, the US Economic Analysis Bureau reported that the Personal Consumption Expenditures Price Index grew 2.5% year-over-year in July, consistent with earlier figures but slightly below forecasts. Core PCE, which excludes fluctuating food and energy costs, also rose by 2.6%.

Tokyo’s Consumer Price Index for August increased to 2.6% year-on-year, up from 2.2% in July, with core CPI rising to 1.6% from 1.5%. Moreover, Japan’s unemployment rate unexpectedly rose to 2.7% in July, the highest since August, indicating emerging labor market challenges.

Amid these dynamics, the outlook for the USD/JPY currency pair appears bearish, with recent technical assessments suggesting further downward pressure may be expected. The USD/JPY is currently trading around 145.40, with significant levels of support identified at 141.69 and near 140.25. Should there be a reversal, it would face resistance at approximately 145.63 and 146.73, but a breakthrough above these levels could lead to a rise toward the 150.00 psychological level.