Japanese Yen loses ground due to decline in Japan's Foreign Reserves – FXStreet

• The Japanese yen fell as investors turned cautious ahead of the US NFP release.
• Japan’s foreign exchange reserves fell to $1.231 trillion in May, the lowest since February 2023.
• The US dollar has struggled as expectations grow that the Fed will cut interest rates twice in 2024.

The Japanese Yen (JPY) weakened slightly on Friday, likely due to a decline in Japan’s foreign exchange reserves in May, reported by the Ministry of Finance. Foreign exchange reserves fell sharply from $1.279 trillion to $1.231 trillion in May, the lowest level since February 2023, as the government intervened in the foreign exchange market to defend the yen.

Finance Minister Shunichi Suzuki said on Friday that the government would take measures against excessive currency fluctuations if necessary and would evaluate the effectiveness of intervention. Suzuki stressed the importance of maintaining market confidence in the finances and said there would be no funding limit for currency intervention, according to Reuters.

The US Dollar (USD) weakened as weak US employment data raised expectations that the Federal Reserve (Fed) will cut interest rates twice in 2024. A Reuters poll conducted between May 31 and June 5 showed that roughly two-thirds of economists expect a rate cut in September. Furthermore, the CME FedWatch tool suggests that the probability of the Fed cutting rates by at least 25 basis points in September has risen to roughly 70.0%, up from 51.0% a week ago.

Daily Digest Market Trends: Japanese yen falls ahead of US employment report

• Japanese government bond yields have fallen from recent highs, with the benchmark 10-year government bond yield falling below 1% for the first time in two weeks.
• According to the U.S. initial jobless claims figures released on Thursday, the number of people filing for unemployment insurance in the week to May 31 increased by 8,000 to 229,000, beating market expectations of 220,000.
• According to Reuters, Bank of Japan Governor Kazuo Ueda said in a speech to the Diet on Thursday that inflation expectations are gradually rising but have not yet reached 2%. “We have been closely examining market trends since our decision in March. It would be appropriate to reduce bond purchases as we move towards the end of our large-scale monetary easing measures,” Ueda said. In addition, Bank of Japan Executive Director Toyoaki Nakamura said that current data indicates it would be appropriate to maintain policy unchanged for the time being.
• The ISM U.S. Services PMI, released on Wednesday, jumped to 53.8 in May, the highest level in nine months and well above the 50.8 forecast. In contrast, the ADP U.S. Employment Changes report showed new payrolls added in May were 152,000, the lowest in four months and well below the 175,000 forecast and April’s downwardly revised figure of 188,000.
• Jibun Bank’s Japan Services PMI was revised upward to 53.8 in May from the previous 53.6. Despite the upward revision, it was still below April’s eight-month high of 54.3, suggesting that growth in the services sector slowed to the slowest since February.

Technical reasons why: USD/JPY sustains gains above 155.50

USD/JPY is trading around 155.80 on Friday. The daily chart indicates a sideways trend as the pair is consolidating within a symmetrical triangle pattern. Moreover, the 14-day Relative Strength Index (RSI) is just below the 50 level, indicating a downtrend.

The immediate support for the USD/JPY pair lies at the psychological level at 155.00. Further support lies at the 50-day exponential moving average (EMA) at 154.73. A drop below this level could increase pressure on the pair and potentially move it towards the throwback support area around 151.86.

On the upside, a key barrier is evident at the upper limit of the symmetrical triangle at 156.80. If the USD/JPY pair can rise above this level, the bearish bias will weaken and the pair may test the psychological barrier of 157.00 and then reach the 160.32 level, its highest level in over 30 years.

USD/JPY: Daily Chart