USD/JPY dips after US services data stumbles
|The Japanese yen has rebounded on Thursday and is trading at 161.01, down 0.43% on the day. The yen has been on a slide over the past four weeks and has declined by 3.9% during that time. On Wednesday, the yen fell as low as 161.95, its lowest level since 1986. US markets are closed today for the Fourth of July holiday.
US ISM services PMI contracts
The US ISM Services PMI disappointed on Wednesday, dropping to 48.8 in June. This was well below the May reading of 53.8 and the market estimate of 52.6 and marked the weakest reading since May 2020. The 50.0 level separates contraction from expansion.
The Federal Reserve won’t mind the weak services data as its looks for signs of a slowdown before it lowers interest rates. The employment component of the Services PMI eased to 46.1 from 47.1 and the US market will be in the spotlight on Friday with the release of nonfarm payrolls for June. The markets are bracing for a gain of 190 thousand, compared to the surprisingly strong gain of 272 thousand in May. If nonfarm payrolls fall below the 200 thousand level, it will lend strong support for a rate cut in September, which currently has a 66% probability, according to the CME’s FedWatch.
Japan’s Household Spending reeled off 13 straight declines before ending the streak with a gain of 0.5% m/m for April. The May report will be released early Friday and a weak gain of 0.1% is expected. Japanese consumers have been squeezed by high prices and weak consumer consumption is hampering sustained economic growth, which the Bank of Japan wants to see before it tightens monetary policy.
USD/JPY technical
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USD/JPY has pushed below the support at 1.6148 and is testing support at 161.00.
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There is resistance at 162.18 and 162.66.
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