Japanese Yen loses ground after Bank of Japan policy meeting

• The Japanese Yen edges lower as BoJ leaves interest rates unchanged at 0% on Friday.
• Policymakers intend to finalize a plan for decreasing bond buying at the next meeting.
• The US Dollar maintains its stability despite weaker-than-expected economic data released on Thursday.

The Japanese Yen (JPY) edges lower on Friday after the Bank of Japan (BoJ) decides to keep its interest rate at 0% at the conclusion of its June policy meeting. The BoJ held rates for the second straight meeting after hiking for the first time since 2007 in March. The central bank did decide to reduce bond purchases, however, aiming to give long-term interest rates greater flexibility. Policymakers sad they intend to finalize a plan for decreasing bond buying over the next 1-2 years to be confirmed at their next policy meeting.

The US Dollar Index (DXY), meanwhile, which measures the value of the US Dollar (USD) against six major currencies, edges higher despite the release of weaker-than-expected economic data on Thursday. The US Producer Price Index (PPI) came in softer, and Initial Jobless Claims were higher than anticipated. Nevertheless, the USD's strength can be attributed to the hawkish stance of the US Federal Reserve (Fed).

Federal Open Market Committee (FOMC) policymakers have adjusted their outlook, now projecting only one rate cut for the year, compared to the three cuts forecasted in March. This revised expectation indicates a more aggressive approach to managing inflation and maintaining economic stability, contributing to the USD's resilience. Investors now await the preliminary US Michigan Consumer Sentiment Index, set to be released on Friday. This index will provide further insights into consumer confidence and economic outlook.

Daily Digest Market Movers: Japanese Yen declines due to a dovish BoJ

• BoJ Governor Kazuo Ueda addressed the post-policy meeting press conference on Friday that the central bank “decided to reduce JGB purchases to ensure long-term yields are formed more freely in markets.”
• Japanese Finance Minister Shunichi Suzuki said on Friday that he aims to achieve the primary balance goal. Suzuki further stated that he will keep an eye on China's excess production on the Japanese economy, per Reuters.
• US Initial Jobless Claims for the week ending June 7 showed a significant increase, with the number of claims rising by 13,000 to 242,000. This figure surpassed market expectations, which were set at 225,000, marking the highest level of jobless claims since August 2023.
• US Producer Price Index (PPI) came in weaker than expected, increasing 2.2% YoY in May, compared to the 2.3% rise in April (revised from 2.2%). Meanwhile, the core PPI figure rose 2.3% YoY in May, below the consensus and April’s reading of 2.4%.
• The Federal Open Market Committee (FOMC) left its benchmark lending rate in the range of 5.25%–5.50% for the seventh consecutive time in its policy meeting on Wednesday, as widely anticipated. In a press conference following the Fed's decision, Fed Chair Jerome Powell remarked that the restrictive stance on monetary policy is producing the expected effects on inflation.
• Japan Finance Minister Shunichi Suzuki said on Tuesday it is important to continue efforts to achieve economic growth and attain fiscal health to retain confidence in the country's fiscal policy, per Reuters.
• According to Reuters, while speaking to parliament last week, Bank of Japan (BoJ) Governor Kazuo Ueda stated that inflation expectations are gradually rising but have yet to reach 2%. "We have been scrutinizing market developments since the March decision. As we proceed to exit our massive monetary stimulus, it's appropriate to reduce bond purchases," Ueda said.

Technical Analysis: USD/JPY moves above 157.50

USD/JPY trades around 157.90 on Friday. Analyzing the daily chart shows a bullish bias, with the pair consolidating within an ascending channel pattern. This pattern typically indicates a continuation of the upward trend, suggesting that the price is likely to keep rising as long as it remains within the channel.

The USD/JPY pair could face an immediate hurdle at the psychological level of 158.00. If the pair breaks above 158.00, the next target is around the upper boundary of the ascending channel near 159.20. The level of 160.32, marked in April as the highest level in over thirty years, represents a major resistance.

On the downside, the support appears at the lower boundary of the ascending channel around the 50-day Exponential Moving Average (EMA) at 155.18. A breach below this level could intensify downward pressure on the USD/JPY pair, potentially driving it toward the throwback support area around 152.80.

USD/JPY: Daily Chart