Japanese Yen depreciates as US Dollar holds ground, ADP Employment Change awaited – FXStreet

• The Japanese yen fell as the Bank of Japan's opinion summary indicated it intended to maintain an accommodative monetary stance.
• Japan's Minister of Economy, Trade and Industry Akazawa said Prime Minister Ishiba expected the Bank of Japan to conduct an economic assessment before raising interest rates further.
• The U.S. dollar has found support as traders remain cautious due to rising geopolitical tensions in the Middle East.

The Japanese yen (JPY) fell slightly against the US dollar (USD) on Wednesday, amid growing doubts about further interest rate hikes by the Bank of Japan (BOJ). On Tuesday, the Bank of Japan indicated in its summary of opinions from its September monetary policy meeting that it has no immediate plans to raise rates further. The central bank intends to maintain an accommodative stance, but leaves room for adjustments if economic conditions show significant improvement.

Economic Revitalization Minister Yoshinari Akazawa said Wednesday that Prime Minister Shigeru Ishiba expects the Bank of Japan to conduct a thorough economic assessment before raising interest rates again. According to Reuters, in his first press conference as Minister of Economy, Trade and Industry, Akazawa stressed that “the top priority is for Japan to completely overcome deflation,'' adding, “It will take time to completely overcome deflation.''

The dollar is supported by a cautious mood in the market against the backdrop of intensifying tensions in the Middle East. However, the lower-than-expected ISM manufacturing PMI in September may have put downward pressure on the US dollar. Traders will now focus on future US ADP employment movements and FedSpeak for future direction.

Daily Digest Market Movers: Japanese yen falls as possibility of Bank of Japan rate hike declines

• According to the CME FedWatch tool, the market has a 63.1% chance of a 25 basis point rate cut by the Federal Reserve in November, while the probability of a 50 basis point rate cut is 36.9%, up from 58.2% a week ago. decreased.
• Prime Minister Benjamin Netanyahu has vowed to retaliate against Tehran for Tuesday's attack, after Iran fired more than 200 ballistic missiles at Israel. In response, Iran warned that any counterattack would lead to “massive destruction,” raising fears of a wider conflict.
• The US ISM manufacturing PMI for September was 47.2, which was in line with the figure announced in August, but lower than the market estimate of 47.5.
• Japan's Tankan Large Manufacturing Business Index showed that the overall business conditions of large manufacturing companies remained stable, with an increase of 13 points in the third quarter, in line with expectations. Additionally, data on Tuesday showed Japan's unemployment rate fell to 2.5% in August from 2.7% in July, beating market expectations of 2.6%.
• Federal Reserve Chairman Jerome Powell said on Monday that the central bank is in no hurry to lower its benchmark interest rate “over time.” Fed Chairman Jerome Powell added that the recent 50 basis point rate cut should not be taken as a sign of similarly aggressive future action, noting that future rate changes are likely to be more modest.
• Japan's newly elected Prime Minister Shigeru Ishiba said Japan's monetary policy should remain accommodative, signaling the need to maintain low borrowing costs to support the fragile economic recovery. This put pressure on the Japanese yen and supported USD/JPY.
• According to the Financial Times, St. Louis Fed President Alberto Moussallem said on Friday that the Fed would begin cutting interest rates “in stages,” following a larger-than-usual 0.5 percentage point cut at its September meeting. said it should. Musallem acknowledged the possibility that the economy may weaken more than expected, saying, “If that is the case, it may be appropriate to accelerate the pace of rate cuts.”
• Minutes of the Bank of Japan's monetary policy meeting last week expressed consensus among members on the importance of remaining vigilant about the risk of inflation exceeding target. Several members pointed out that raising the interest rate to 0.25% was appropriate as a means of adjusting the level of financial support. Several others suggested that moderate adjustments to financial support would also be appropriate.

Technical Analysis: USD/JPY holds above 143.50 at 9-day EMA

USD/JPY was trading around 143.80 on Wednesday. Analysis of the daily chart shows that the pair is consolidating within an ascending channel pattern, suggesting a bullish bias. The 14-day Relative Strength Index (RSI) is also hovering just below the 50 level. A break above this threshold would further confirm the continuation of the bullish trend.

The USD/JPY pair may encounter resistance near the top of the ascending channel at 146.80, followed by the five-week high of 147.21, which was last reached on September 3.

On the downside, immediate support appears at the 9-day exponential moving average (EMA) near 143.50, followed by the lower end of the ascending channel at 143.00. A break below this level could push USD/JPY towards the 139.58 level, its lowest since June 2023.

USD/JPY: Daily chart