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  • Writer's pictureSieracki Milosz

USD/JPY Recovery Amid Strong US ISM Non-Manufacturing PMI | Forex Insights


In the ever-fluctuating world of forex trading, the USD/JPY currency pair has recently witnessed a surge in its value. This shift comes as a result of the US ISM Non-Manufacturing PMI report for August surpassing market expectations, signaling an uptick in economic activity. In this article, we will delve into the factors driving the USD/JPY recovery and explore the potential implications for traders.

A Surprising Boost from US Economic Data

The Institute for Supply Management (ISM) released the Non-Manufacturing PMI for August, a crucial indicator of the US economy's health. This report, which focuses on the services sector, exceeded forecasts by registering a reading of 54.5, surpassing the anticipated 52.5. This positive development was further amplified by July's figure of 52.7, suggesting a steady and promising trend.

Inflation Concerns and Rate Hike Speculations

Despite this positive economic data, concerns about inflation persist. The US Federal Reserve (Fed) is striving to meet its 2% inflation target, but the latest data indicates a slight setback. The Personal Consumption Expenditures (PCE) index, the Fed's preferred gauge of inflation, rose by 3.3% in July. This could potentially delay the Fed's progress towards its inflation goal.

In response to these inflationary pressures and the robust ISM report, market participants are reconsidering the possibility of a 25 basis point rate hike in November. If this materializes, it would push the Federal Funds Rate (FFR) into the range of 5.50% to 5.75%. Consequently, US Treasury bond yields have surged, with the 10-year benchmark note rate reaching 4.296%, marking a 10 basis point increase. The US Dollar Index also reached a seven-month high of 105.024, gaining 0.21%.

USD/JPY: A Volatile Response

The USD/JPY currency pair experienced heightened volatility following the release of the ISM report. Initially, the pair traded negatively around the 147.30/98 range. However, it managed to trim some of its losses due to developments in the Asian session.

Japanese officials have been actively considering their options in response to currency speculation. Consequently, the market has been closely monitoring the 148.00/150.00 range. Traders are advised to exercise caution before initiating fresh, long positions on the pair, as intervention by Japanese authorities could influence its trajectory.

Factors on the Horizon

To gain a comprehensive understanding of the USD/JPY's future movements, it is essential to consider upcoming events. The Japanese economic calendar features a speech by the Bank of Japan's (BoJ) Nakagawa. Meanwhile, on the US front, unemployment claims data and speeches by various Fed officials could provide insights into the central bank's monetary policy direction.

Technical Analysis: A Look at the Charts

From a technical perspective, the USD/JPY remains biased towards an upward trajectory. It could potentially test the key level of 148.00 if it weren't for the threat of Japanese authorities intervening in the foreign exchange markets. The next significant resistance level would be the daily high of 148.82, recorded on November 1.

Conversely, if the pair faces downward pressure, it may find support at last week's high, which has now become a support level at 147.37. A breach of this support could expose the Tenkan-Sen at 146.12.

USD JPY 06-09-2023 BlackBull Trading View market charts


In conclusion, the USD/JPY currency pair has experienced a rebound driven by a stronger-than-expected US ISM Non-Manufacturing PMI report. However, the specter of inflation and the possibility of a rate hike loom over the market. Japanese authorities' response to currency speculation also adds an element of uncertainty. As traders navigate these challenges, they should keep a close eye on key technical levels and upcoming economic events to make informed decisions.


1. How did the US ISM Non-Manufacturing PMI impact the USD/JPY pair?

The USD/JPY pair experienced a recovery after the US ISM Non-Manufacturing PMI for August exceeded expectations, signaling improved economic activity in the US.

2. What is the significance of the PCE index in relation to inflation?

The PCE index is the US Federal Reserve's preferred gauge of inflation. A rise in this index indicates increasing inflationary pressures, which can impact the Fed's monetary policy decisions.

3. Why are traders considering a rate hike in November?

The robust ISM report has led traders to reconsider the possibility of a 25 basis point rate hike by the Federal Reserve in November to combat inflationary pressures.

4. How have US Treasury bond yields and the US Dollar Index reacted to recent developments?

US Treasury bond yields have surged, with the 10-year benchmark note rate reaching 4.296%. The US Dollar Index also reached a seven-month high of 105.024.

5. What should traders be cautious of when trading the USD/JPY pair?

Traders should exercise caution and monitor the 148.00/150.00 range closely, as Japanese authorities are considering options to address currency speculation, which could influence the pair's direction.

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