Japanese yen falls below 144, Ueda and Powell talk policy

• Ueda, Powell participating in panel at ECB Bank Forum
• Japanese yen slips below 144
• US consumer confidence surges higher

USD/JPY continues to push higher and is closing in on the 145 line. In the North American session, the yen is trading at 144.60, up 0.37%.

Will Ueda provide any clues at ECB Bank Forum?

It’s a quiet day on the data calendar, with no important US releases. In Japan, retail sales are expected to improve to 5.4%, up from 5.0%. Today’s highlight is the ECB Bank Forum in Sintra, with the heads of the major central banks taking part in a panel on policy. Bank of Japan Governor Ueda and Fed Chair Powell will participate and any hints about rate policy could move USD/JPY.

The Fed and the BoJ are in very different situations, which could make the ECB event all the more interesting. The Fed is close to its tightening cycle, in which it has raised rates by some 500 points. Fed Chair Powell has hinted at a couple of more rates this year, but if inflation continues to fall, the Fed could start chopping rates early in 2023.

The BoJ has maintained its ultra-loose policy, even as all the other major banks have raised rates in order to curb inflation. The BoJ has insisted that inflation is temporary, even though it remains above the Bank’s target of 2%. The BoJ isn’t looking at raising interest rates anytime soon, although it could tweak its yield curve control policy in order to prop up the ailing Japanese yen, which has plunged 3.7% in the month of June.

Earlier this week, Japan’s top currency diplomat, Masota Kanda warned that the yen’s weakening was “rapid and one-sided”. Kanda said he would not rule out any options, including currency intervention. The markets have become accustomed to verbal intervention when the yen drops sharply, but Tokyo followed its bark with a bite late last year, when it intervened in the currency markets after the yen fell below 151. As the yen continues to depreciate, currency intervention becomes a stronger possibility.

On Tuesday, the US posted solid releases, an indication that the economy remains resilient despite the Fed’s aggressive tightening. Durable Goods Orders and New Home Sales were higher and beat expectations, and Conference Board Consumer Confidence jumped in June from 102.5 to 109.7, its highest level since January 2022. The strong numbers provide support for a Fed hike in July, with the markets pricing rate increase at 79%, according to FedWatch.

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USD/JPY Technical

• USD/JPY is testing resistance at 144.65. The next resistance line is 145.36
• There is support at 142.94 and 142.00

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