USD/JPY: Markets eye stronger services PMI into July 31 BoJ – Scotiabank

The Japanese Yen (JPY) is entering Thursday’s NA session unchanged against the US Dollar (USD), having faded its early Asian session gains driven by the release of a mixed set of PMI’s, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

JPY flat on the daily chart

"Markets clearly celebrated the data with a specific focus on the surprise in services (53.5 vs. 51.7 prev.) as they ignored the weaker manufacturing (48.8 vs. 50.1 prev.) print.

"The data should provide additional confidence to policymakers at the BoJ as they look to resume their policy tightening following the successful conclusion of US/Japan trade talks and the passing of last weekend’s upper house election. Interest rate differentials are offering the JPY support, as we note a continued narrowing in US-Japan spreads."

"We look to near-term strength in the JPY as we approach the July 31 BoJ meeting. For USD/JPY, we look to near-term weakness and a decline toward the lower end of the recent range, at 142.00."