Japanese Yen trims part of intraday gains vs retreating USD as traders await US PCE data

• USD/JPY attracts some sellers on Wednesday and is pressured by a combination of factors.
• Intervention fears and hawkish BoJ expectations underpin the JPY, weighing on spot prices.
• Sliding US bond yields weigh on the USD as traders now look to the key US PCE Price Index.

The USD/JPY pair recovers a few pips from a one-and-a-half-week low, touched earlier this Wednesday, and trades just below the 157.00 mark during the first half of the European session, still down around 0.25% for the day.

Traders remain on high alert as authorities have intensified their campaign of verbal interventions to signal Tokyo's strong determination to support the domestic currency, underpinning the Japanese Yen (JPY) and weighing on the USD/JPY pair. In fact, Japan's top currency diplomat Atsushi Mimura and Finance Minister Satsuki Katayama warned markets to take joint US-Japan messaging on FX depreciation seriously.

Furthermore, US Treasury Secretary Scott Bessent said Friday that he and Katayama discussed the desirability of a strong Yen in online talks. This comes after US President Donald Trump conveyed his concerns about the Yen's depreciation to Prime Minister Sanae Takaichi on the sidelines of the United Nations General Assembly, fueling speculation of another US-Japan joint intervention and underpinning the JPY.

Furthermore, Minutes from the BoJ's July monetary policy meeting, released on Monday, revealed that policymakers debated the need for faster interest rate hikes amid growing concern over mounting inflation risks. This lifted expectations that the BoJ will hike again as soon as October or December, further boosting the JPY. Apart from this, a modest US Dollar (USD) weakness exerts pressure on the USD/JPY pair.

US Treasury yields pulled back from multi-year highs amid the overnight fall in crude oil prices to a three-week low and dovish remarks from New York Federal Reserve (Fed) President John Williams, saying that the US central bank need not rush its next move. This, in turn, drags the USD away from a two-month high, touched on Tuesday, which further contributes to the offered tone surrounding the USD/JPY pair.

However, growing acceptance that the US Federal Reserve (Fed) will raise borrowing costs again by the end of this year, along with geopolitical uncertainties, helps limit the downside for the USD. Traders also seem hesitant and opt to wait for the release of the US Personal Consumption Expenditures (PCE) Price Index and the final US Q2 GDP print, allowing the USD/JPY pair to trim a part of its intraday losses.

USD/JPY daily chart

Technical Analysis

The USD/JPY pair keeps a bearish near-term bias following the recent failure to find acceptance above the 100-day Simple Moving Average (SMA) at 159.56. Moreover, spot prices remain below a dense Fibonacci resistance band between the 38.2% retracement at 157.13 and the 61.8% retracement at 159.76, suggesting that rallies are likely to be capped.

On the topside, immediate resistance is seen at the 38.2% Fibo. retracement at 157.13, followed by the 50.0% retracement at 158.45. Further up, the 100-day SMA at 159.56 and the 61.8% retracement at 159.76 reinforce a broader supply zone ahead of the 78.6% level at 161.64. On the downside, initial support emerges at the 23.6% retracement at 155.50, ahead of the structural Fibonacci low near 152.87, where buyers would be expected to defend the broader uptrend structure.

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