The Japanese Yen remains near new 38-year lows

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The Japanese Yen (JPY) continues to lose ground on Tuesday, which could be attributed to the improvement of the US Dollar (USD). The USD/JPY pair is trading near its new low of 161.75 since 1986. However, verbal intervention by Japanese authorities may limit the decline of the JPY.

Japan’s Finance Minister, Shunichi Suzuki, stated on Tuesday that he is “closely monitoring FX movements with vigilance.” Suzuki refrained from commenting on specific exchange rate levels, noting that there are no changes in the government’s stance on exchange rates.

The US Dollar (USD) halted its three-day losing streak as US Treasury yields rose due to growing expectations that the Federal Reserve (Fed) will cut interest rates in 2024. Traders are awaiting a speech from Federal Reserve Chairman Jerome Powell on Tuesday.

On the other hand, on Friday, the US Bureau of Economic Analysis reported that US inflation fell to its lowest annual rate in over three years. The US Personal Consumption Expenditures (PCE) Price Index rose 2.6% year-on-year in May, down from 2.7% in April, meeting market expectations. Core PCE inflation also increased by 2.6% year-on-year in May, down from 2.8% in April, aligning with estimates.

Technical Analysis: USD/JPY remains above 161.50

USD/JPY is trading around 161.60 on Tuesday. The daily chart analysis shows a bullish bias, with the pair hovering near the upper limit of an ascending channel pattern. However, caution is advised as the 14-day Relative Strength Index (RSI) is above 70, indicating that the asset is overbought. This suggests that a possible correction could be imminent in the short term.

If the USD/JPY pair breaks above the upper limit of the ascending channel around 161.70, it will reinforce the bullish sentiment, possibly pushing the pair towards the psychological resistance level of 162.00.

On the downside, immediate support is observed at the nine-day Exponential Moving Average (EMA) located at 160.38. A break below this level could increase bearish pressure on USD/JPY, potentially taking it towards the lower limit of the ascending channel around 158.50. A further decline below this channel support could lead to a test of the June low at 154.55.