Japanese Yen Boosted Senior Japanese Politician’s Remarks

By The USD/JPY pair has plummeted over 0.85% and dropped below the Ichimoku Cloud (Kumo) for the first time since January 15, hinting at possible extended downtrend. Bearish RSI suggests further falls, with supports at 155.00, 154.55, 151.86, and resistance at 156.33. A breach may push to 157.00, potentially reversing the trend. The pair trades at 155.65 after hitting a daily high of 157.10.

The yen rose for a second straight session against the dollar on Tuesday, boosted by comments by a senior Japanese politician about normalizing monetary policy, adding pressure on the Bank of Japan to continue hiking interest rates to boost the currency. The U.S. dollar overall was higher as traders waited for inflation data later in the week, while the Australian and New Zealand dollars continued to struggle after China’s surprise interest rate cuts. The Aussie dollar is viewed as a proxy for China risks.

In afternoon trading, the dollar index rose 0.1% to 104.45, after earlier climbing to a two-week high. The dollar reacted little to data showing U.S. existing home sales fell more than expected in June as the median house price set another record high. Home sales dropped 5.4% last month to a seasonally adjusted annual rate of 3.89 million units, the lowest since December, data showed. Meanwhile, the median existing home price soared 4.1% from a year earlier to an all-time high of $426,900, the second straight month it touched a record peak.

In other currencies, the euro was down 0.4% against the dollar at $1.0851, after falling to a two-week trough earlier in the session. Sterling was 0.2% lower against the dollar at $1.2903.

The Australian and New Zealand dollars struggled to regain their footing on Tuesday after China’s move to cut several key interest rates. China surprised markets on Monday by cutting major short and long-term interest rates in its first such broad move since last August, signalling intent to boost growth in the world’s second-largest economy.

Trading was relatively subdued in a week with little in the way of economic data until the release of U.S. personal consumption expenditure, PCE, inflation figures for June on Friday. In addition, the market’s reaction to U.S. President Joe Biden’s decision to bow out of the election race was muted, though there was some unwinding of the so-called Trump trade, which saw the dollar and U.S. Treasury yields ease a touch.