USD/JPY gains some ground on prospects for BOJ intervention

• USD/JPY fell more than 0.30% towards 147.20.
• Initial jobless claims for the first week of September were lower than expected.
• Masato Kanda did not rule out intervention to curb JPY weakness.

In Thursday’s session, the pair USD/JPY it fell slightly towards the 147.20 area, driven by rising expectations that the Bank of Japan will take action to stem the yen’s decline. On the other hand, the dollar is consolidating, but hardline bets on the Federal Reserve (Fed) limit the fall of the dollar.

The US Bureau of Labor Statistics reported that the number of people filing for unemployment benefits increased, but was less than expected. The actual number was 216,000 versus the 234,000 expected and was lower than the previous weekly reading of 229,000.

Meanwhile, the dollar measured by the DXY index remains above the 105.00 zone, its highest level since March. On the other hand, US Treasury yields eased slightly but held at weekly highs after recovering yesterday following strong US ISM PMI numbers for August. In this sense, the CME FedWatch tool suggests that markets continue to bet on higher odds of a final hike by the Federal Reserve (Fed) in this cycle, with the odds of a 25 basis point hike in November and December increasing. They are close to 40%.

However, these expectations could change after the US Consumer Price Index (CPI) figures for August next week.

As for the Bank of Japan (BoJ), Reuter reported that Japan’s top foreign exchange diplomat, Masato Kanda, stated that the Japanese banking authorities are considering an intervention to crack down on “speculative” movements. In this sense, in case the BoJ intervenes, the yen could rise somewhat, but the divergences in monetary policy seem to be the main reason for the yen’s weakness. Also, on Friday, investors will learn figures from Japan’s Gross Domestic Product (GDP) revision for the second quarter.

USD/JPY levels to watch

Looking at the daily chart, USD/JPY is showing signs of bullish exhaustion, leading to a neutral to bearish technical outlook. The Relative Strength Index (RSI) is sloping negatively into bullish territory, hinting at a possible momentum shift, while the Moving Average Convergence (MACD) exhibits shorter green bars. In a broader context, the pair is above the 20,100,200-day simple moving average (SMA), highlighting the continued dominance of bulls across the board.

Support levels: 147.00, 146.00, 146.10 (20-day SMA).

Resistance levels: 147.50, 148.00, 148.50.

USD/JPY Daily Chart