The USD/JPY currency pair has experienced a notable rise, nearing the critical 160.00 level that typically triggers intervention from the Bank of Japan (BoJ). As of recent trading, the pair hovered around the 159.30 mark. This upward movement comes amid various economic indicators and market assessments.
In the latest update, the S&P Global flash Purchasing Managers Index (PMI) revealed that the US Composite PMI remained steady at 51.7 for May, matching April’s score and indicating an ongoing expansion in economic activity. Significantly, the Manufacturing PMI improved from 54.5 to 55.3, exceeding market expectations of 54.0. While this uptick in manufacturing is promising, the Services PMI dipped slightly to 50.9 from 51.0, suggesting a softer growth momentum in the services sector.
The report from S&P Global highlighted that while business activity continued to grow in May, the rate of growth had slowed compared to earlier in the year. It noted sluggish growth in the service sector, attributed to only modest improvements in new business inflows. The stronger manufacturing data has contributed to the dollar’s strength, leading traders to reevaluate their predictions regarding potential rate cuts by the Federal Reserve.
In a related comment, US Treasury Secretary Scott Bessent remarked on the mutual understanding between the United States and Japan regarding excessive volatility in currency markets, a statement that has been interpreted as tacit support for Japan’s intervention measures aimed at stabilizing the Yen. Bessent expressed confidence in BoJ Governor Kazuo Ueda’s ability to navigate monetary policy effectively without succumbing to inflationary pressures.
From a technical perspective, the USD/JPY is currently trading at 159.19 on the 4-hour chart. The pair maintains a bullish bias, as prices remain above the 20-period Simple Moving Average (SMA) at approximately 158.99 and the 100-period SMA, located around 157.82. This positioning preserves the broader uptrend structure.
As traders monitor the price action, the pivotal area around 159.19 is being tested. The Relative Strength Index (RSI) is retracting toward 68, suggesting that while upward momentum is favorable, it’s approaching overbought territory, which may temper the pace of future gains.
On the resistance front, immediate challenges are posed at the pivot area of 159.19, followed by a horizontal resistance level at 159.35. A decisive break above this zone could pave the way for new highs in the near term. Conversely, on the downside, initial support is positioned at 159.09, just ahead of the 20-period SMA and the horizontal support level at 158.90. The 100-period SMA serves as a more robust dynamic support, should the market experience a corrective pullback.
