• Japan’s government will likely warn of the effects of a weak yen in the economic policy roadmap.

• Business activity in the US manufacturing sector shrank in May.

• Markets are pricing in a 59.1% chance of a Federal Reserve rate cut in September.

The USD/JPY price analysis points to renewed bearish sentiment as the yen gains amid increasing pressure on the Bank of Japan to hike interest rates. Meanwhile, the dollar weakened after PMI data in the previous session revealed another month of contraction in the manufacturing sector.

Notably, Bank of Japan Deputy Governor Ryozo Himino said the central bank should be keen on the impacts of a weak currency as it guides monetary policy. Meanwhile, Japan’s government will likely warn of the effects of a weak yen in the economic policy roadmap for 2024. Analysts believe this will pressure the BoJ to hike rates, mainly if a weak yen increases imported inflation.

Meanwhile, the dollar tried to recover after hitting fresh monthly lows on Monday due to downbeat US economic data. Business activity in the manufacturing sector shrank in May, with the ISM PMI dropping from 49.2 to 48.7. This decline indicated a slowdown in the economy due to high interest rates. As a result, rate cut expectations increased, leading to a decrease in Treasury yields. Consequently, the yen, which is sensitive to moves in US yields, rose.

After the report, markets are pricing in a 59.1% chance of a Federal Reserve rate cut in September. Later in the day, investors will scrutinize a report from the US showing the number of job vacancies. This will shape the outlook for rate cuts in the US.

USD/JPY key events today

• US JOLTS job openings

USD/JPY technical price analysis: Bears pierce ascending trendline

On the technical side, the USD/JPY trend has reversed from bullish to bearish with a break below the 30-SMA and the bullish trendline. The bullish trend weakened when it made a new high above 156.50 but failed to reach the next key resistance at 158.01.

At this point, the price made a lower high and broke below the 30-SMA, the 156.50 level, and the bullish trendline. Currently, the path is clear for bears to retest the 154.02 support level. Moreover, the downtrend will remain intact if the price stays below the 30-SMA and the RSI in bearish territory below 50.

https://www.forexcrunch.com/blog/2024/06/04/usd-jpy-price-analysis-yen-soars-on-rising-rate-hike-bets/