Yen claws back, US inflation next

The Japanese yen has reversed directions and is in positive territory. In the European session, USD/JPY is trading at 133.86, down 0.38% on the day.

Despite today’s gains, the yen remains under strong pressure. The currency has mustered just one winning session in the month of June, and USD/JPY rose to 134.56 on Thursday, a new 20-year low for the yen. The symbolic 135 line looks ripe for the taking as early as next week.

Japan’s Minister of Finance issues yen warning

Japanese officials have chosen not to respond to the yen’s most recent descent, although Japan’s Finance Minister Suzuki did issue an underhand warning earlier today about the weak yen. Suzuki said he would not comment on the question of intervention so as to avoid any impact, but added that rapid fluctuations in the exchange rate were “not desirable”.

This latest verbal intervention comes after the yen hit a new 20-year low against the dollar and a 7-year low against the euro. The yen has declined a massive 14% against the dollar this year and could fall further against the euro as the ECB announced yesterday that it tightening policy. The BoJ and Ministry of Finance have tried jaw-boning in the past to support the ailing yen but without success. Investors have been on the lookout for a “trigger point” at which Tokyo would intervene, but the yen has crossed above 125 and 130 without hindrance, and it looks like the 135 line will also be breached without a response from Japanese officials.

It’s been a rough week for the Japanese currency, as USD/JPY has risen 2.29%. We could see some volatility from the pair later today, with the release of the US inflation report. A weak inflation release would pare expectations of Fed hiking and would be bullish for the yen. Conversely, a stronger than expected CPI reading would likely propel the dollar higher.

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USD/JPY Technical

• USD/JPY is testing resistance at 133.68. Above, there is resistance at 1.3638
• There is support at 132.26 and 131.24

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