Japanese Yen neutral as it meets resilient US data

The Japanese Yen holds a neutral stance as US economic data proves resilient. The USD/JPY pair is hovering around the low 159.00s on Friday. In Japan, July inflation surged with headline consumer prices increasing 1.9% year-over-year and core measures expanding. Business surveys in August exceeded expectations. These factors have increased the likelihood of the Bank of Japan raising rates at its September meeting, with a 80% probability implied by recent swaps data.

Meanwhile, the United States economy remains strong, contributing to a softer Dollar and putting an upward pressure on the Yen. The latest Purchasing Managers' Index (PMI) survey from the US showed private sector activity accelerating, the Composite index rising to 56 from 54.5 due to a robust services sector. However, manufacturing activity fell short of forecasts.

This bullish US economic data supports the Fed's higher-for-longer policy outlook and provides support for the Dollar. The US Treasury announced it would double its purchases of long-dated bonds to stabilize the bond market and prevent yields from rising too much. Washington's shift towards economic sanctions on Iran instead of military action has also boosted risk appetite, which is generally negative for the Yen, but the expectation of a BoJ rate hike and lower US yields have helped to neutralize this effect.

The market is expected to remain volatile until the Fed Chair Kevin Warsh's appearance at the Jackson Hole event and the Bank of Japan's decision to raise rates on September 18. Until then, a weaker Dollar and a clear signal of BoJ tightening will keep the bias slightly bearish for the Yen, with the 200-day moving average as the primary support level.

On the 4-hour chart, USD/JPY is currently trading at 159.02, displaying a modest bullish bias as it stays above both the 100-period Simple Moving Average (158.81) and the 20-period SMA (158.91). The clustering of these moving averages just below price indicates a supportive environment, while the Relative Strength Index (RSI) around 51 suggests neutral momentum, hinting at consolidation rather than a significant trend change in the short term.

In the short term, resistance is expected to face at 159.04, followed closely by 159.13, creating a tight ceiling that bulls need to break through to continue their upward movement. Conversely, support can be found near the current trading range, with the 20-period SMA (158.91) and the 158.87 horizontal level forming the first level of demand, followed by the 100-period SMA (158.81) and a deeper support level at 158.63, which will help limit any pullbacks while the overall positive trend continues.

(Technical analysis for this story was generated with the assistance of an AI tool). Agustin Wazne joined FXStreet as a Junior News Editor, specializing in Commodities and covering Majors. GBP/USD remains cautiously defensive, sliding to the low 1.3600s after reaching a new high above 1.3670 earlier in the day. The decline follows two consecutive gains and a lackluster advance in the Dollar, along with disappointing UK economic data.

EUR/USD is experiencing modest losses around 1.1670 after failing to break past the 1.1700 level convincingly. The pair's decline follows a marginal recovery in the Dollar as market participants review recent US data and developments in the US bond market. Gold has recovered strongly from Thursday's indecisive price action, breaking above the $4,600 level for the first time in three months, reflecting the strong performance of the precious metal despite the dollar's rise and continued increases in US Treasury yields across all maturities.

The cryptocurrency market remains bullish on Friday, with Bitcoin breaking above $77,000, and altcoins such as Ethereum and Ripple mirroring Bitcoin's positive momentum, trading near $2,400 and $1.35, respectively. Finally, Kevin Warsh is set to make his debut at the Jackson Hole economic symposium next week, but a significant hawkish surprise is unlikely due to intervention in the bond market.

The US Treasury's decision to double buyback operations for long-dated debt on Wednesday is the most notable event of the week. On Wednesday at 12:32 GMT, the department revealed its plan to increase the maximum size of its liquidity support buyback operations from $2 billion to at least $4 billion per operation, effective September 9 and running through November 4.