Japanese Yen Holds Steady Against Weaker USD Amid Traders’ Caution Before Japan’s Elections

• Japanese Yen Faces Challenges as BoJ Rate Hike Expectations Diminish.
• Japan’s National CPI Data Fails to Stir Market Movements.
• Market Caution Prevails Ahead of Japan’s Upper House Elections.

The Japanese Yen (JPY) is under pressure against the US Dollar during Friday’s Asian trading session, continuing its downward trend. Today’s release of Japan’s consumer inflation figures did little to alter the perception that the Bank of Japan (BoJ) will not raise interest rates this year, which has been a negative factor for the Yen. Additionally, a risk-on market sentiment has further weakened the appeal of the Yen as a safe-haven currency since the start of the month.

Despite this, Yen traders are showing caution, avoiding aggressive bets before the upcoming upper house election in Japan. The US Dollar (USD), meanwhile, is experiencing some weakness following dovish comments from Federal Reserve Governor Christopher Waller, keeping the USD/JPY pair below the 149.00 level and its three-month high. However, expectations that the Fed might postpone rate cuts are providing some support to the USD, limiting any significant downside in the pair.

Japanese Yen Under Pressure Amid Political Uncertainty and BoJ Policy Stance

• The House of Councillors elections in Japan, set for this Sunday, are seen as a crucial test for Prime Minister Shigeru Ishiba’s coalition. Recent polls indicate potential challenges for the government, which could lead to increased political instability and economic concerns.
• Amid these political uncertainties, Japan’s efforts to secure a trade deal with the US could be complicated, further impacting the BoJ’s policy decisions and the Yen’s performance.
• Today’s data from the Japan Statistics Bureau showed the National Consumer Price Index (CPI) increased by 3.3% YoY in June, with core inflation figures also presenting a mixed picture. This data provides some context for the BoJ’s upcoming inflation outlook revision at their July meeting.
• On the US front, Federal Reserve officials have expressed varied views on the rate cut timeline, reflecting ongoing economic uncertainties and the impact of tariff adjustments, which could take months to fully materialize.
• Investors are now awaiting further US economic data releases, including the Preliminary Michigan Consumer Sentiment and Inflation Expectations, along with Building Permits and Housing Starts, for additional market direction.

Technical Analysis: USD/JPY Awaits Breakout Beyond 149.00

The USD/JPY pair is currently testing key technical levels. After holding firm below the 100-hour Simple Moving Average (SMA) earlier this week, the pair’s upward trajectory suggests a bullish outlook. However, traders should watch for a sustained move beyond the 149.15-149.20 range before targeting the 150.00 psychological level.

Conversely, the 148.20-148.25 zone offers immediate support. A break below this could lead to further declines, potentially testing the 147.00 support level and below.