Yen today - The USD/JPY currency pair experienced a slight decline around 143.20 as Japanese authorities took action to maintain currency exchange rate stability on Thursday morning. Thus, the Yen pair was also affected by optimistic yet cautious market sentiment, as well as a weakening US Dollar ahead of several US economic data releases.

Earlier that day, Bank of Japan (BoJ) Governor Kazuo Ueda indicated that the tolerance limit for the yield on 10-year Japanese Government Bonds (JGB) would be expanded from 0.5% to 1.0%. This move caused JGB yields to reach their highest level since 2014.

The BoJ also announced unlimited purchases of 5-year and 10-year bonds as part of their efforts to control the JPY's movements.

Recently, Japan's Chief Cabinet Secretary Hirokazu Matsuno reiterated his favorite statement proposing surveillance over foreign exchange movements and expressed confidence in the BoJ's policies.

In contrast, the US Dollar Index (DXY) fell from a three-week high as the market stabilized following a tumultuous period. Nevertheless, DXY responded to a "risk-off" sentiment and benefited from rising US Treasury yields on Wednesday. The potential strengthening of the DXY is also supported by robust data on US ADP Employment Change for July.

On Wednesday, Fitch Ratings downgraded the US government's credit rating, raising concerns about a potential debt payment failure and affecting market sentiment.

However, the ADP Employment Change data for July showed an increase that exceeded market expectations, with 324,000 jobs added compared to the previous estimate of 189,000. This data was revised from an earlier reading of 455,000, providing additional strength to the US Dollar.

Additionally, the US Treasury Department has increased the likelihood of testing demand for US bonds after the credit rating downgrade, impacting rising bond yields and strengthening the US Dollar.

It’s worth noting that the strengthening of the JPY, viewed as a "safe haven," and concerns about tighter policies from the BoJ drove the USD/JPY pair higher the previous day.

Furthermore, US Treasury Secretary Janet Yellen and White House Economic Advisor Jared Bernstein defended the credibility of US Treasury bonds on Wednesday night. Policymakers also reaffirmed the strength of the US economy following Fitch Ratings' expressed concerns, which catalyzed the credit rating downgrade.

A similar pattern can be observed in the recent stable market conditions. In this context, 10-year US Treasury yields have risen to their highest levels since November 2022, while Wall Street indices closed in the negative zone. S&P500 Futures are still at their lowest in two weeks after experiencing declines for two consecutive days.

Looking ahead, economic data such as the US ISM Manufacturing Index, Factory Orders, Weekly Initial Jobless Claims, and quarterly reports on Nonfarm Productivity and Unit Labor Costs will be crucial for USD/JPY traders. Above all, concerns regarding a hawkish policy shift from the BoJ may deter buyers unless strong US economic data is observed.

Technical analysis from Fxstreet.com suggests that a "pin bar" candle on the daily chart on Wednesday has driven the Yen's rise today, unless this currency pair manages to break through resistance at the 143.55 level in daily closing.

Disclaimer!

This analysis is based on views from fundamental and technical perspectives from trusted sources and is not intended as advice or solicitation. Always remember that this content aims to enrich readers' information. Always conduct independent research first regarding other forex information as a reference for your trading.

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