USD/JPY retraces toward 147.50 ahead of US PMI data releases

• USD/JPY treads waters below 147.50 ahead of the US PMI releases.
• Japan's currency diplomat Kanda indicated market intervention; underpins the Japanese Yen (JPY).
• The resurgence of trade tensions between the US and China weighed on the pair.

USD/JPY snaps a three-day winning streak, trading lower around 147.40 during the early trading hours in the European session on Wednesday. The pair retreated from a new high since November 2022 marked on Tuesday. The pair is encountering downward pressure following a statement from Japan's top currency diplomat, Masato Kanda, as reported by Reuters.

Kanda issued a warning against the recent sell-off of the Japanese Yen (JPY) and indicated that authorities won't rule out any options if speculative movements in the currency market continue. This statement has had a bearish impact on the USD/JPY pair.

According to a private survey released on Tuesday, business activity in China's services sector expanded at its slowest rate in eight months. This development has raised concerns about the deteriorating economic conditions in the world's second-largest economy, which may impact Japanese exports to the country.

Furthermore, US Commerce Secretary Gina Raimondo anticipates that there will be no changes to the US tariffs on China, which were imposed during President Donald Trump's administration until the ongoing review by the US Trade Representative's (USTR) Office is completed. This resurgence of trade tensions between the US and China could potentially reduce investors' appetite for riskier assets, which makes it difficult to achieve a significant corrective decline in the pair.

Additionally, market expectations for the Bank of Japan's (BoJ) continued commitment to an accommodative monetary policy were reinforced by comments from BoJ policymaker Hajime Takata on Wednesday. Takata emphasized the need for the central bank to maintain its accommodative stance patiently, citing the high uncertainty in the economic outlook.

US Dollar Index (DXY), which measures the value of the US Dollar (USD) against the six other major currencies, hovers around 104.70 at the time of writing. Investors appear to be increasingly accepting the no-interest rate hike by the US Federal Reserve (Fed) during the upcoming September policy meeting. However, the markets are still factoring in the possibility of one more 25 basis points (bps) rate hike by the end of this year.

Furthermore, the Federal Reserve (Fed) is anticipated to keep interest rates at a higher level for a more extended period. This hawkish outlook continues to support the US Treasury bond yields, which favors the Greenback’s bulls.

Investors will indeed keep a close eye on the upcoming data releases from the United States (US). The US ISM Services PMI for August and the US S&P Global PMIs are scheduled for release later in the North American session. These data releases will offer valuable insights into the present economic scenario in the United States and have the potential to provide a more defined direction for the USD/JPY pair.