The yen remains weak.

USD/JPY exchange rate reaching 144.37. The yen's weakness is attributed to various factors, including domestic policies and unfavorable economic indicators. Recent data shows that the Tokyo Core Consumer Price Index (CPI) stood at 3.2% in June, which is the same as the previous month but still higher than the 2% target. However, the new Bank of Japan Governor, Mr. Kazuo Ueda, stated that the central bank will continue its accommodative monetary policy for an extended period.

Analysts predict that the government will intervene to curb the yen's depreciation when the USD/JPY reaches around 145. In the past, the government intervened twice in October and November, after the yen depreciated to its lowest level in 30 years at 150 USD/JPY.

However, intervening in the yen's depreciation is not an easy task and comes with significant costs, as it involves exchanging dollar reserves for yen. This is a financial battle against the global foreign exchange market, which has a daily trading volume of up to $7.5 trillion. Japan may also need assistance from its G7 allies, particularly the United States, to make currency intervention more effective.

The yield curve control (YCC) policy of the central bank is expected to continue, and there is no indication that it will be discontinued soon. Implementing YCC keeps bond yields at low levels, and abruptly ending YCC could result in a stronger yen compared to its current state.

Additionally, both the manufacturing and services sectors have experienced a decline in their Purchasing Managers' Index (PMI) figures after a continuous increase since the beginning of the year. The decline in the manufacturing sector is attributed to reduced orders and significant drops in demand from China. Inflationary pressures, such as rising production costs, also contributed to the decrease. However, business confidence among major manufacturers in the past quarter has shown an increase, reaching 5, which is higher than the expected 2. Notably, sectors such as textiles, iron and steel, non-ferrous metals, and food and beverages performed particularly well.

Finance Minister Taro Aso stated last Friday that Japan will take appropriate measures to address the excessive weakness of the yen, based on the latest opinions from ministers and government officials. Moreover, on the past Tuesday, Toshihide Kasutani, a top financial diplomat of Japan, mentioned that officials have been in close contact with Janet Yellen, the US Treasury Secretary, and other foreign officials to discuss currency and financial market matters.

Technical analysis data (5H)

Resistance: 144.65, 144.86, 144.97

Support: 144.34, 144.22, 144.02

Source: Investing.com