• The Japanese yen rose following a speech by Bank of Japan Governor Kazuo Ueda.
• Japan’s consumer price index (CPI) rose 2.8% year-on-year in July, remaining at its highest level since February.
• Federal Reserve Chairman Powell may make statement on possible interest rate cuts at Jackson Hole symposium.

The Japanese yen (JPY) is strengthening against the U.S. dollar (USD) following the release of the National Consumer Price Index (CPI) inflation data and Bank of Japan (BoJ) Governor Kazuo Ueda’s speech to Parliament on Friday. Ueda said that “the BOJ raised interest rates in July as the economy and inflation moved largely in line with forecasts.”

BoJ Governor Ueda also indicated that there would be no change in the stance on adjusting monetary easing if the economy and inflation continue to perform in line with forecasts. Ueda noted that the BoJ’s recent policy decisions were appropriate and warned that outlining the future policy path could lead to unnecessary speculation.

Read more about BoJ speech Ueda: Central bank raised interest rates in July as economy and inflation moved mostly in line with forecast

The USD/JPY pair is trading lower as the US dollar is receiving downward pressure from lower Treasury yields. However, the Greenback gained ground on mixed S&P Global Purchasing Managers Index (PMI) data released on Thursday.

In addition, US Federal Reserve (Fed) Chairman Jerome Powell is scheduled to speak at a symposium in Jackson Hole on Friday. Powell may make a statement on the possibility of interest rate cuts in the United States (US), which is something that market participants are eagerly awaiting.

Daily Market Update: Japanese Yen Gains After BoJ Governor Ueda’s Speech

• Japan’s national consumer price index rose 2.8% year-on-year in July, holding the rate for the third month in a row and remaining at its highest level since February. Additionally, the national CPI excluding fresh food rose 2.7%, the highest reading since February, in line with expectations.
• The US Composite PMI fell to 54.1 in August, a four-month low, from 54.3 in July, but was still above market expectations of 53.5, indicating continued expansion in US business activity, marking 19 consecutive months of growth.
• The S&P Global US Services PMI rose to 55.2 in August 2024 from 55.0 in July, defying expectations for a decline to 54.0. Meanwhile, the manufacturing PMI fell to 48.0 in August from 49.6 the previous month, missing market expectations of 49.6 and signaling the second straight contraction in US manufacturing activity at the fastest pace this year.
• Federal Reserve Bank of Boston President Susan Collins on Thursday said she believes the U.S. central bank can lower inflation without triggering a recession and indicated her support for starting to cut interest rates next month. In an interview with Reuters in Jackson Hole, Collins said: “I think there’s a clear path to achieving our goals without an unnecessary decline and with a healthy labor market.”
• Kansas City Federal Reserve President Jeff Schmid told CNBC in Jackson Hole that he was closely examining the factors behind the rising unemployment rate and would rely on the data to decide whether to cut rates next month.
• The minutes of the July FOMC meeting show that most Federal Reserve officials agreed last month that they would likely cut their benchmark interest rate at their upcoming meeting in September if inflation continued to decline.
• Japan’s trade balance fell to a deficit of ¥621.84 billion in July, reversing a surplus of ¥224.0 billion reported in June and missing market estimates of a shortfall of ¥330.7 billion. Japan’s imports rose 16.6% year-on-year in July to a 19-month peak of ¥10,241.01 billion, up significantly from the 3.2% augment in June. Exports, meanwhile, rose 10.3% year-on-year to a seven-month peak of ¥9,619.17 billion, missing market forecasts of 11.4%.

Technical Analysis: USD/JPY is falling towards 145.50 around the downtrend line

USD/JPY is trading around 145.60 on Friday. An analysis of the daily chart shows that the pair is trading above the downtrend line, suggesting a weakening of the bearish bias. However, the 14-day Relative Strength Index (RSI) remains just above 30, indicating that the bearish trend may still be in play.

In terms of support levels, the USD/JPY pair is testing the downtrend line at 145.50. A break of this level could strengthen the bearish trend and push the pair to trade around the seven-month low of 141.69, which was recorded on August 5. A further decline could take the pair towards the support level of 140.25.

On the other hand, the USD/JPY pair could face immediate resistance around the nine-day exponential moving average (EMA) at 146.46. A break of the nine-day EMA could support the pair test the resistance level at 154.50, which has moved from previous support to current resistance.

USD/JPY: Daily Chart