Japanese Yen loses ground amid US PMI data

• US ISM Services PMI rose to 54.5 in May, pointing to stronger business activity.
• Ueda said the BoJ will debate the "pros and cons" of a rate hike as inflation risks increase.
• Stronger US data supported Treasury yields and boosted the US Dollar against the Japanese Yen.

The USD/JPY pair is trading just below the 160.00 price level on Wednesday, as the US Dollar (USD) remains supported by stronger-than-expected economic data, while the Japanese Yen (JPY) struggles to attract sustained demand amid a cautious market mood.

The latest US ISM Services PMI rose to 54.5 in May from 53.6 in April, surpassing market expectations and pointing to stronger growth in the services sector. The report reinforced confidence in the resilience of the US economy and supported expectations that the Federal Reserve (Fed) may maintain a cautious approach toward interest rate cuts.

Earlier in the day, Bank of Japan (BoJ) Governor Kazuo Ueda struck a hawkish tone during his speech in Tokyo, stating that the BoJ must carefully weigh the "pros and cons" of a rate hike if inflation risks become more significant than risks to economic growth.

In the past the BoJ has supported the value of the Yen higher when the USD/JPY exchange rate rises above 160.00. The last time the central bank pushed into the market in this fashion was just over a month ago on April 30, which saw the Yen drop from an intraday high of 160.72 to an intraday low of 155.55.

He warned that higher energy prices could generate broader inflation pressure and reiterated that the central bank will continue raising rates at an appropriate pace if underlying inflation evolves in line with its projections.

Short-term technical analysis:

On the 4-hour chart, USD/JPY trades at 159.98, maintaining a clear bullish bias as price holds above both the 20 and 100-period Simple Moving Average (SMAs) at roughly 159.64 and 158.97, respectively. The immediate topside focus is the nearby horizontal resistance at 160.00, with the Relative Strength Index (RSI) around 66 suggesting firm but somewhat stretched upside momentum that could leave the pair sensitive to any rejection from this ceiling.

On the downside, initial support is seen at the intraday horizontal levels clustered around 159.89 and 159.81, ahead of the prior reaction floor near 159.70. A deeper pullback would expose the 20-period SMA at 159.64, with the 100-period SMA down at 158.97 acting as a more distant, yet still constructive, dynamic base as long as it holds.

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