Event to watch today:
15:15 EET. USD – ADP Employment Change
17:00 EET. USD – ISM Services PMI
USDJPY:
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The yen is receiving fresh fundamental support following the release of the minutes from the Bank of Japan’s June meeting. The document showed that policymakers were paying increased attention to inflation risks and considering the possibility of further rate increases. Additional support came from data showing that real wages rose by 1.6% in June, marking a sixth consecutive monthly increase and strengthening the case for monetary policy normalization.
Pressure on USDJPY is also being reinforced by the recent joint intervention by the United States and Japan in support of the yen. Officials indicated that they were prepared to act again, while the US side publicly backed Tokyo’s efforts. At the same time, lower US Treasury yields and a reduced probability of another Federal Reserve rate increase are diminishing the appeal of interest rate differential trades.
Slower growth in Japan’s services sector remains a limiting factor, meaning that sustained yen appreciation is not guaranteed. Strong US ADP or ISM data could also restore demand for the dollar. Nevertheless, the combination of a weaker dollar impulse, expectations of further Bank of Japan action, and the risk of renewed official measures makes a decline in USDJPY the more resilient base-case scenario.
Trading idea: SELL 157.50, SL 158.15, TP 155.90
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