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USD/JPY Steady as Japanese PMIs Mixed

The Japanese yen is slightly lower on Thursday. USD/JPY is trading at 156.70, down 0.08% on the day at the time of writing.

Japan’s PMIs for April were a mixed bag and the yen didn’t show much reaction. Services PMI dipped to 53.6, down from 54.3 in March and just shy of the forecast of 53.8. This was the smallest growth in services since February.

Manufacturing PMI showed improvement and rose to 50.5, up from 49.6 in March and above the market estimate of 49.7. This was the first growth since May 2023 as manufacturing has been in a prolonged slump. The 50 level separates contraction from growth.

The Japanese economy is showing signs of improving after first-quarter GDP declined. Inflation has been easing, which could hamper the ability of the Bank of Japan to increase rates without reigniting deflation.

FOMC minutes: Fed considered a rate hike at May meeting

With inflation falling around the globe, major central banks have been under pressure to lower interest rates. The central banks remain cautious, however, and the Fed minutes indicated that there was a discussion to raise rates at the May 1st meeting. Other central banks are also unclear about their rate path – the Reserve Banks of Australia and New Zealand held rates at their most recent meetings but also considered hiking rates.

The FOMC minutes noted that policy makers are not confident about lowering rates at this stage and want to see more evidence that inflation will continue to drop and remain sustainable around the 2% target. This message is consistent with what we have been hearing from a host of Fed members, although the markets have priced in a September rate cut.

USD/JPY Technical

  • USD/JPY tested support at 156.02 earlier. Below, there is support at 156.33
  • 157.07 and 157.32 are the next resistance lines

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