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USD/JPY - Economic Releases support the Dollar
02.06.2022

Over the past 24 hours, the USD/JPY pair has formed and completed its third consecutive bullish day. The exchange rate has increased by over 300 PIPs measuring almost 2.5% in the last three days. The bullish trend is the largest since 28th April 2022 and has almost formed a full bullish price correction (full price correction at 131.340).

This morning the price has formed a price range with limited volatility and very little trade volume. This is common as the market has already witnessed a strong price movement and is now waiting for further price drivers. The main factors driving the US Dollar higher over the past 24 hours have been the economic releases for the US, the scheduled NFP for tomorrow and Biden’s backing of the Fed.

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The US Dollar

It is important to note that the US Dollar is increasing across all competitors and not only the Yen. The US Dollar Index has also reached a weekly price high and the highest price since the 23rd May where the currency broke through support levels.

According to forecasts, the May Manufacturing PMI (Purchasing Manager Index) was meant to decrease from 55.4 to 54.5, but surprisingly it increased to 56.1 which remains in the growth zone and is also higher than the previous month. JOLTS job openings also released a slightly higher than expected figure of 11.40 million, however, the figure is lower than the previous month. Generally speaking, the market seems to have reacted positively to the economic releases, specifically the PMI.

Yesterday afternoon, the US Treasury Secretary Yellen said in an interview that it was a miscalculation to rely on natural effects to bring down inflation, and that inflation was made worse by unforeseen circumstances, such as the Ukrainian-Russian conflict and major disruptions in supply chains. Yellen voiced several possible ways to reduce inflation alongside the monetary policy. In her opinion, a slowdown in price growth can be achieved by reducing the budget deficit, pumping further US oil into the market, and reducing household spending on utilities. However, she did not advise if this is something which can successfully pass through congress.

The Japanese Yen

Yesterday the Japanese Yen declined against all major currencies including against the USD, GBP and EUR. Looking at the Yen Index we can see that the asset has come under severe pressure with the currency declining for 7 consecutive days and seeing a stronger decline each day.

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Japan also released its national Manufacturing PMI for May. The indicator decreased to 53.3 points. In general, manufacturing activity in the country has been increasing at the weakest pace over the past three months. This seems to be a result of the country’s strong connection with China, which imposed severe quarantine restrictions, causing inflamed disruptions in the supply of raw materials.

The Bank of Japan Deputy Governor Wakatabe confirmed that the central authority should maintain its large stimulus program as inflation has yet to hit a sustainable 2.0% target. He also stressed the need to create conditions under which wages have the ability to increase faster and maintain stable inflationary growth in the longer term.

USD/JPY

Looking at the technical aspect of the currency pair, we can see that the price has remained above both moving averages and volume weighted average price indicators. In addition to this, the price of the exchange rate has managed to form consecutive higher price highs and higher price lows since 30th of May. The currency pair has also been unable to form a single price correction or lower price low since then.

However, traders should keep an eye out for any further developments causing price swings and new trends. Traders have now turned their attention to the next economic releases regarding the US employment sector this afternoon and tomorrow, specifically the NFP and Unemployment Rate release.

IMPORTANT NOTICE: Any news, opinions, research, analyses, prices or other information contained in this article are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and therefore, it is not subject to any prohibition on dealing ahead of dissemination. Past performance is not an indication of possible future performance. Any action you take upon the information in this article is strictly at your own risk, and we will not be liable for any losses and damages in connection with the use of this article.
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