USD/JPY dips amid global economic fears, JPY strengthens on authorities' language intervention

• USD/JPY trades lower as concerns over the global economy and geopolitical events linger.
• Market anticipates a single Fed rate hike, contrary to officials’ double prediction.
• Declining US Treasury yields and official comments bolster JPY, pressing USD/JPY lower.

USD/JPY stays firm at around the 143.40s area after diving towards a daily low of 142.93 on renewed concerns of a global economic slowdown amidst over-the-weekend geopolitical events weighed on investors’ mood. At the time of writing, the USD/JPY exchanges hand at 143.46, down 0.16%.

Market apathy towards Fed rate cut; Dallas Fed Manufacturing Index improved, but still flashes a “hard landing”

US equities shifted negatively, while the Japanese Yen (JPY) strengthened on Japanese authorities’ comments regarding excessive currency moves. A light Monday economic calendar in the United States (US), with the release of the Dallas Fed Manufacturing Index in June plunging to -23.2, showed some improvement but remained in recessionary territory. Although it continues to contract, it was the most significant advance in three months.

In the meantime, traders disregarded the chance for a US Federal Reserve (Fed) interest rate cut, as shown by the CME FedWatch Tool. Nonetheless, market players expect one interest rate increase of a quarter of a percentage point, contrary to two foreseen by Fed officials, with July odds at 74.4%, as shown in the CME FedWatch Tool.

Meanwhile, tussles between Russian mercenaries and Putin’s military ended on Sunday after the Wagner Group army stopped its advance to Moscow, threatening to remove incompetent and corrupt Russian commanders that he blames for botching the war.

Aside from this, the Vice Finance Minister for Internation Affairs, Masato Kanda, commented the recent Yen weakening was too “rapid and one-sided.” That helped offset previous Yen losses and sent the USD/JPY tumbling toward its low of 142.93 before recovering some lost ground.

In addition, falling US Treasury bond yields lent a lifeline to the JPY, as the 10-year Treasury note yields 3.717%, down two and a half basis points (bps), a headwind for the greenback, and the USD/JPY. The US Dollar Index, a basket of six currencies against the US Dollar (USD), drops 0.17% to 102.699.

USD/JPY Price Analysis: Technical outlook

From a technical perspective, the USD/JPY is set to record additional gains after breaching resistance at the November 22 daily high of 142.24. That exacerbated the USD/JPY rise above 143.00 toward a year-to-date (YTD) high of 143.878. But verbal intervention by Japanese authorities triggered a correction. Nevertheless, if USD/JPY surpasses 144.00, the next stop would be last year-s October 27 daily low of 145.10, ahead of rallying to the November 10 daily high at 146.59. Conversely, the USD/JPY must fall below 143.00 and  142.24 to prolog its losses towards sold support at the 20-day Exponential Moving Average (EMA) at 140.90.