The Japanese Yen against the US dollar (USD/JPY) has increased demand to refresh its one-month high around 143.90. This comes despite a slowdown in the US dollar ahead of key data on Thursday.

Thus, this Japanese Yen exchange rate confirms the strengthening of US Treasury bond yields, which have recently strengthened. Additionally, concerns about the dovish stance of the Bank of Japan (BoJ) following indications regarding inflation in Japan also play a role.

However, the yields on both 10-year US Treasury bonds and Japanese bonds recorded their first daily increase in three years.

The yield on US Treasury bonds reached around 4.02%, while the yield on Japanese bonds was around 0.585%. This is happening as the market prepares for US inflation data, although a cautious mood prevails after a lack of major surprises from price pressures originating from China.

On the other hand, Japan's Producer Price Index (PPI) in July fell to 3.6% YoY from the previous 4.1%, and lower than the market forecast of 3.5%.

Meanwhile, monthly data showed an increase to 0.1% compared to the forecast of 0.2%, contrasting with the previous figure, which recorded a decline of -0.2%.

Thus, the Bank of Japan (BoJ) is likely to maintain its very accommodative monetary policy.

Especially given the rising concerns that major central banks, which have previously announced interest rate hikes, are likely to soon halt further tightening measures.

In a different location, a slight rise in S&P 500 futures contracts and a strengthening Nikkei 225 index also support the rise of the USD/JPY currency pair, which is considered a risk status indicator.

It should be noted that despite the major tensions between the US and China that should affect sentiment, this seems to have largely been ignored in recent periods.

However, China's Ministry of Commerce has expressed serious concerns and stated the possibility of taking retaliatory actions on Thursday morning in the Asia region, as reported by Reuters.

Statements from China's Ministry of Commerce were also quoted in the report, expressing hope that the US would respect market economy laws and fair competition principles.

Earlier that day, US President Joe Biden signed a long-awaited bill that gives the US Treasury Department the authority to prohibit or regulate US investments in certain Chinese entities, as reported by Reuters.

Previously, concerns about economic conditions in China, Europe, and the UK had combined with a crackdown by global rating agencies on the banking sector, resulting in a negative impact on sentiment.

On the same side, concerns about deflation risks in China and uncertainty in the markets regarding the measures to be taken by major central banks in the future also play a role. However, the US dollar faces difficulties in bringing a risk-off mood given the currently low yield levels.

Then, data on inflation based on the Consumer Price Index (CPI) for July will have significant importance for traders trading in the USD/JPY currency pair, as it will help identify clearer directional movement.

Market projections indicate an increase in the core Consumer Price Index to 3.3% YoY compared to the previous figure of 3.0%, while the Core CPI, which excludes Food & Energy components, may remain stable with no change at 4.8%.

The importance of this statistic has increased following disappointment from the Nonfarm Payrolls (NFP) data in the same month and due to concerns that the Federal Reserve (Fed) is getting closer to peak levels in its monetary policy.

Technical Overview For buyers of the Japanese Yen (USD/JPY) to maintain control of the situation, a daily close above the downward resistance line since late October 2022 is necessary. Currently, this currency pair is around the level of 143.80 at the time of writing.

Warning!

This analysis is based on a fundamental and technical perspective from trusted sources and does not constitute advice or solicitation. Always remember that this content aims to enrich the information of readers. Always use independent research regarding other forex information as a reference in your trading.

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