Japanese Yen slips as firmer yields lift US Dollar ahead of global PMIs

• USD/JPY bounces back toward the 159.00 zone, recovering most of the prior day's slide as the US Dollar steadies.
• A rebound in US Treasury yields and a solid jobless claims print are behind the Dollar's recovery.
• The Yen is the day's weakest major currency, pressured by high Oil prices, with Japan's inflation data and flash PMIs due Friday.

USD/JPY trades north of the 159.00 barrier at the time of writing on Thursday, higher on the day and clawing back most of the previous session's losses. The move owes more to a steadier US Dollar (USD) than to anything out of Japan, with the Greenback recovering after slipping to a three-month low.

The US Dollar's footing improved as United States (US) Treasury yields bounced back from Wednesday's sharp drop, following the US Treasury's decision to expand its liquidity-support buybacks of longer-dated debt. Firmer labor data helped as well, with weekly Initial Jobless Claims coming in below expectations and keeping the case for the Federal Reserve (Fed) to hold rates next month intact. The US Dollar Index (DXY) recovered back toward the 98.90 area after touching its weakest level since mid-May.

The bigger drag, though, is a broadly soft Japanese Yen (JPY), the weakest of the majors on the day. Elevated Oil prices are the immediate headwind, since Japan imports almost all of its energy. July trade figures underlined the strain, with imports surging on higher energy costs and the country running a sizeable trade deficit. Longer term, fiscal worries and still-low interest rates remain weights on the currency.

Yet the rebound sits awkwardly against the policy backdrop. The Bank of Japan (BoJ) is expected to raise rates in September, just as recent US data nudge the Fed toward holding a narrowing gap that argues against chasing USD/JPY much higher. Analysts at Societe Generale remain constructive on the Yen over the medium term but caution that a durable turn lower in the pair may need either fresh FX intervention or a meaningful drop in oil to remove the growth headwind.

Short-term technical analysis:

On the 4-hour chart, USD/JPY trades at 159.12, holding a mildly bullish near-term bias as it remains above both the 20-period Simple Moving Average (SMA) at 159.10 and the 100-period SMA at 159.09. The latest 14-period Relative Strength Index (RSI) at 52.67 sits in neutral territory with a slight positive tilt, suggesting steady upside pressure while the pair consolidates just under nearby resistance.

On the topside, initial resistance appears at the horizontal barrier at 159.19, where a clear break would open the way for further gains. On the downside, immediate support is clustered around the short-term averages at 159.10 and 159.09, followed by layered horizontal floors at 158.98, 158.85 and 158.66, which together underpin the constructive tone while price holds above them.

(The technical analysis of this story was written with the help of an AI tool. Know more.)