• Initial jobless claims in the US fell from 243,000 to 238,000 last week.

• The likelihood of a Fed cut in September fell to 58%.

• The Swiss National Bank cut rates a second time on Thursday.

The USD/JPY price analysis points Northward as the dollar hovers near a 7-week high against the yen, which it hit in the previous session. The greenback gained ground due to upbeat employment data and a growing contrast in policy outlooks with other major central banks.

Investors worried about a possible intervention as the dollar rallied against the yen on Thursday. This rally came amid data showing a decline in US unemployment claims. Initial jobless claims fell from 243,000 to 238,000 last week, indicating continuing strength in the labor market. However, there were signs that unemployment was on the rise. Notably, the total number of benefits rose to the highest level since the start of the year.

After the report, the likelihood of a Fed cut in September fell to 58%. At the same time, policymakers have remained cautious about inflation and the outlook for rate cuts. Notably, Fed’s Neel Kashkari said it would take one to two years to lower inflation to target, raising concerns about high rates for longer.

The Fed has remained slightly hawkish, forecasting one rate cut in December. However, other central banks are planning to cut sooner. Furthermore, the Swiss National Bank cut rates a second time on Thursday, opening the door for more global rate cuts. This contrast has benefited the dollar and weighed on the yen.

Meanwhile, the Bank of Japan was more dovish than expected at the last meeting, which has hurt Japan’s currency. As the BoJ delays hikes and the Fed delays cuts, the rate gap between the two countries remains wide.

USD/JPY key events today

• US flash manufacturing PMI
• US flash services PMI

USD/JPY technical price analysis: Bullish momentum pauses at 1.414 Fib resistance

On the technical side, the USD/JPY price has risen to the 1.414 Fib extension level in a strong bullish move. The price trades well above the 30-SMA, which supports a bullish bias. Meanwhile, the RSI reached the overbought region for the first time in a while, indicating a surge in bullish momentum.

However, after such a big swing, the price must pause or pull back to retest the SMA or the bullish trendline. Still, given the solid bullish bias, the uptrend might continue beyond the 1.414 Fib extension level.

https://www.forexcrunch.com/blog/2024/06/21/usd-jpy-price-analysis-yen-plummets-to-7-week-lows/