USD/JPY edges higher, FOMC minutes next

The Japanese yen continues to lose ground. On Tuesday, the USD/JPY is trading at 161.66 in the North American session, up 0.16% on the day.

On the data calendar, there are no Japanese events today. The US released the ADP employment report earlier and the ISM Services PMI and FOMC minutes will be published later today.

Can Tokyo do anything about the ailing yen?

Japanese officials must be scratching their heads about the Japanese yen, which can’t find its footing. Since March 11, the yen has posted only two winning weekly sessions against the US dollar and has tumbled 8.5% during that time.

Japan has responded with warnings that it is alarmed about the yen’s sharp descent and intervened twice in the currency markets at the end of April and in early May, selling some $61 billion and buying yen. The interventions gave the yen a brief boost but it quickly resumed its downswing and has fallen to its lowest levels in 38 years.

The US/Japan rate differential is huge and with the Federal Reserve hesitant to cut rates and the Bank of Japan reluctant to hike, it’s difficult to see the yen showing improvement. The Fed won’t lower rates before September at the earliest and the BoJ hasn’t signaled that it plans to raise rates when it meets on July 31.

Fed Reserve Chair Powell said earlier this week that inflation was back on the “disinflationary path” but that he needed more evidence that inflation was “moving sustainably down towards 2%” before any rate cuts. Powell’s cautious tone is likely what we’ll say in the FOMC minutes from the June meeting. Powell was asked whether he thought the Fed would lower rates in September but sidestepped the question. The markets have priced in a September cut at 64%, up from 56% a week ago, according to CME’s FedWatch tool.
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USD/JPY Technical

• USD/JPY faces resistance at 161.76 and 162.06
• 161.52 is a weak support line. Below, there is support at 160.98

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