USD/JPY holds below the 145.00 area, eyes on US data

• USD/JPY breaks below the 145.00 mark as US Treasury yields retreated from multi-year highs.
• Japan’s industrial activity contracted for the third consecutive month in August.
• US Business activity in August expanded at a slow pace.
• The Jackson Hole Symposium will be a closely watched event for traders.

The USD/JPY pair remains on the defensive during the early Asian trading hours on Thursday. The major pair currently trades around 144.80, down 0.03% for the day. The US Dollar (USD) edges lower as US Treasury yields retreated from multi-year highs and declines below 4.20%.

On Wednesday, Japan’s industrial activity contracted for the third consecutive month in August. The preliminary data from Jibun Bank revealed that Japan's manufacturing PMI for August increased to 49.7 from 49.6. The result was lower than the 49.5 expected. While Service PMI rose from 53.8 to 54.3 over the same period. However, the downbeat first reading of S&P PMI data from the US, UK, and Eurozone fuels recession fears and increases demand for the Japanese Yen, a traditional safe-haven asset.

The US Dollar (USD) edges lower following the data showed that US Business activity in August expanded at a slow pace. That said, the preliminary S&P Global Composite PMI decreased to 50.4, down from 52.0 previously and below market expectations of 52.0. This is the largest decrease since November 2022. S&P Global Manufacturing PMI fell to 47 from 49 in the prior month, while Services PMI dropped to 51 from 52.4 in the previous month. Meanwhile, US annual New Home Sales came in at 714K, exceeding expectations of 705,000 by a significant margin.

Earlier this week, Federal Reserve Bank (Fed) of Richmond President Thomas Barkin said that monetary policy would need to be tightened if inflation remained elevated. Market players will take cues about the interest rates outlook from the Jackson Hole Symposium on Thursday. Hawkish comments from the central banks' policymakers might limit the upside of the Japanese Yen and support the USD/JPY pair. That said, the monetary policy differential between the US and Japan is the main driver of the Yen's weakening.

Looking ahead, the US weekly Jobless Claims and Durable Goods Orders will be due on Thursday. The Jackson Hole Symposium will be a closely watched event for traders. On Friday, the attention will shift to the Fed Chairman Jerome Powell's Speech. The events will be critical for determining a clear movement for the USD/JPY pair.