The USD/JPY pair has gained strength, hovering around the 159.30 mark as it nears the significant 160.00 level, which typically triggers intervention from the Bank of Japan.
Recent preliminary data from the S&P Global Purchasing Managers Index (PMI) indicates that the US composite PMI remained steady at 51.7 for May, matching the figure from April and suggesting ongoing economic growth. The manufacturing PMI showed notable improvement, climbing from 54.5 to 55.3, exceeding forecasts of 54.0. However, there was a slight decrease in the services PMI, which fell from 51.0 to 50.9, signaling a slowdown in that sector.
According to S&P Global, “Business activity continued to grow in May, but at a slower pace than earlier in the year,” with the report underscoring that growth in the services sector was weak, marked by only a modest increase in new business. The strong manufacturing data has bolstered the dollar, as traders re-evaluate their expectations regarding potential Federal Reserve interest rate cuts.
U.S. Treasury Secretary Scott Bessent remarked that both nations concur on the undesirability of excessive fluctuations in currency markets, which many took as indirect backing of Japan’s recent attempts to stabilize the yen. Bessent expressed optimism that Bank of Japan Governor Kazuo Ueda would effectively navigate monetary policy while addressing inflationary concerns.
USD/JPY technical analysis:
On the 4-hour chart, USD/JPY is trading at 159.19, showing a near-term bullish trend as it remains above key moving averages—specifically, the 20-period simple moving average (SMA) at around 158.99 and the 100-period SMA at approximately 157.82. The upward trend seems intact, although the price is testing the horizontal level at 159.19 as a potential pivot. The Relative Strength Index (RSI) has dipped back to around 68, indicating that while there is still positive momentum, it’s edging toward overbought conditions, which may temper future gains.
Looking up, immediate resistance is found at the pivot area of 159.19, with a horizontal barrier at 159.35. A decisive break here could lead to new highs in the short term. On the downside, initial support is noted at 159.09, which precedes the 20-period SMA and the horizontal level at 158.90. The 100-period SMA might serve as a deeper support level if the pullback extends.
