Japanese Yen Seesaw with US Dollar after Hitting 160 Mark

The Yen breached psychological resistance level at 160 against the U.S. dollar, as market participants observed no signs of Japanese authorities intervention.

• PCE came higher than the market expectation, but the dollar index trades sideways as the result was already priced in.
• The Japanese Yen traded above 160 against the dollar, but it quickly strengthened as the market speculated on an intervention from the Japanese authority.
• Gold prices eased on strong U.S. economic performance, while oil prices declined on optimising development from the Middle East. 

The U.S. Personal Consumption Expenditures (PCE) data released last Friday slightly surpassed market expectations and the previous reading, supported by recent positive economic indicators in the U.S. This bolstered the dollar index, as investors interpreted the data as a sign that the Federal Reserve may scale back its plans for interest rate reductions this year. However, attention shifted to the equity markets, where the S&P 500 saw a nearly 3% gain last week. This was attributed to optimism surrounding companies' earnings reports during the ongoing earnings season.

Meanwhile, in Japan, the Japanese Yen breached the psychological resistance level at 160 against the U.S. dollar, as market participants observed no signs of intervention from Japanese authorities to support the currency. In the commodity markets, gold prices were impacted by the upbeat PCE reading, which strengthened the dollar and exerted downward pressure on gold. Additionally, oil prices eased as optimism grew regarding developments in the Middle East, particularly efforts by the U.S. to broker a peace deal between Israel and Hamas.

 

DXY_Dollar Index

The US Dollar mounted a sharp rebound following the release of better-than-expected inflation data, injecting fresh uncertainty into the outlook for the US economy. Despite previous indicators suggesting lacklustre economic performance, the unexpected surge in the US Core PCE Report underscored concerns about persistent inflationary pressures, potentially delaying any imminent interest rate cuts. Investors are now closely monitoring subsequent economic data releases and forthcoming Federal Reserve announcements to gauge the trajectory of monetary policy.

The Dollar Index is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 54, suggesting the index might extend its gains since the RSI stays above the midline. 

Resistance level: 106.35, 107.05

Support level: 105.70, 105.25