Japanese Yen muted on a soft US Dollar note

USD/JPY held steady around the 159.00 region on Monday, as a disappointing Japanese growth report did not move the market in either direction. The currency pair has been fluctuating between support at 158.60 and resistance near 159.50 for five consecutive days, resulting in a standoff rather than a clear trend. Recent US data has dampened expectations of a Federal Reserve (Fed) rate hike next month, which has helped keep the Dollar from rallying.

The lower USD/JPY is supported by the weaker Japanese economy, with a second-quarter GDP growth of just 1.1%, below expectations of 2.0%. The Bank of Japan (BoJ) is still expected to raise rates in September, despite the GDP deflator rising 2.6% on the year. Inflation remains a concern, with the inflation rate still above target.

The Middle East's geopolitical tensions and rising oil prices add to the inflation picture, but they also fuel the BoJ's push for a September rate hike. On the 4-hour chart, USD/JPY is currently trading at 159.45, consolidating between support and resistance levels. The pair is above the 20-period Simple Moving Average (SMA) at 159.31 but still below the 100-period SMA at 159.94.

The Relative Strength Index (RSI) around 59 indicates moderate positive momentum without being overbought, suggesting a balanced near-term outlook as the market digests recent gains. Key support is at 159.35, followed by the 20-period SMA at 159.31, while the immediate resistance is at 159.60, with the 100-period SMA at 159.94 providing a higher cap.