The Japanese yen renews its monthly maximum against the US dollar after solid domestic inflation data

• The Japanese Yen receives new offers in reaction to the strong PPI of Japan services.
• The data reaffirms the upload of the Boj rates and reinforce the JPY amid geopolitical risks.
• The moderate expectations of the Fed undermine the USD and exert pressure on the USD/JPY.

The Japanese Yen (JPY) attracts new buyers during the Asian session on Tuesday after the publication of solid inflation data. In addition, the comments of the Governor of the Bank of Japan (BOJ), Kazuo Ueda, left the door open for greater hardening of the policy by the Central Bank. This marks a strong divergence compared to the expectations that the Federal Reserve (FED) will cut interest rates later this year and turn out to be a key factor that provides good impulse to the JPY.

Apart from this, the persistent geopolitical risks derived from the prolonged war between Russia and Ukraine and the conflicts in the Middle East benefit even more the status of a relative safe refuge of the JPY. The US dollar (USD), on the other hand, remains depressed near its lowest level since April 22 amid concerns about worsening the US fiscal situation this contributes to the fall of the USD/JPY torque towards the neighborhood of 142.00, or more than a minimum of one month, and supports the perspectives of additional losses.

The Japanese Yen receives a strong impulse as the most solid internal inflation data reaffirms the upload bets of the Boj’s

• The Bank of Japan reported earlier this Tuesday that the Service Producer Price Index (PPI) – an advanced indicator of the inflation of the Japan services sector – rose 3.1% in April compared to the previous year. This adds to the solid inflation figures to the consumer last week and keeps the expectations of new rates of rates by the Bank of Japan alive.
• In addition, the governor of the Boj, Kazuo Ueda, showed a willingness to continue increasing the rates and said that the Central Bank must be alert to the risk that the increase in food prices can boost the underlying inflation that is already close to its objective of 2%. This provides a good impulse to the Japanese yen and drags the USD/JPY to a minimum of more than a month.
• Japan finance minister Katsunobu Kato said that interest rates reflect several factors, but the market sees the increase in rates as a reflection of concerns about state finances. Kato added that the government will closely monitor the bond market situation in the middle of the increase in superlargo bond yields and a close dialogue with bond investors will continue.
• The president of the USA, Donald Trump, announced an extension of the deadline to impose 50% tariffs on imports from the European Union until July 9, raising the feeling of global risk. However, the uncertainty about Trump’s commercial policies persists, which keeps investors in suspense and turns out to be another factor that benefits the safe refuge status of the JPY.
• Trump described the Russian president, Vladimir Putin, from ‘Crazy’ and said he was considering new sanctions against Russia after the greatest drone attack to Ukraine in more than three years of war. In addition, Israel continues to bombard Gaza, maintaining geopolitical risks at play and further supporting JPY’s demand.
• The US dollar, on the other hand, struggles to attract buyers and languishes near the monthly minimum amid concerns that the broad tax cuts and Trump’s expenses bill worsen the US budget deficit.
• The operators now wait for the US economic agenda – which includes the publication of the requests for durable goods and the consumer conference of the Board Conference. However, the approach will remain focused on FOMC minutes, the preliminary impression of the US Q1 and the Personal Consumption Expenditure Price Index (PCE).
• Investors this week will also face the publication of the Tokyo CPI on Friday, which will play a key role in the influence of JPY’s price dynamics. However, the fundamental background seems to lean in favor of the JPY bullies and suggests that the lower resistance path for the USD/JPY torque is still down.

USD/JPY bassists now expect a break below the 142.00 mark before positioning themselves for a greater fall

From a technical perspective, the failure of the previous day before the Fibonacci recoil level of 61.8% of the rebound in April-Mayo and the subsequent fall favor the bassists of the USD/JPY. In addition, the oscillators in the daily chart remain in negative territory and are still far from being in the overall area. This, in turn, supports the perspectives of an additional depreciative movement in the short term for the currency pair. Some continuation sales below the 142.00 brand will reaffirm the perspective and drag counted prices below the intermediate support of 141.55, towards the round figure of 141.00. The downward trajectory could extend even more towards the minimum of the year to date, or levels below the psychological brand of 140.00 played on April 22.

On the other hand, any attempt of recovery could face strong resistance near the round figure of 143.00. This is closely followed by the 143.25 area, or the 61.8%fibonacci recoil level, which if it is exceeded decisively could trigger a new round of coverage of shorts and raise the USD/JPY torque to the 143.65 region on the route to the 144.00 mark. A sustained strength beyond the latter could pave the way for greater recovery, although the upward movement could still be seen as an opportunity for sale near the 144.80 zone and remain limited near the psychological brand of 145.00.