Japanese Yen falls near multi decade low

USD/JPY trades above163.90 on Thursday as the US Dollar (USD) strengthens following significantly better-than-expected United States (US) labor market data.

US Initial Jobless Claims fell to 187K in the week ending July 18, well below market expectations of 212K and the previous revised reading of 209K. The result marked the lowest level since 1969, suggesting that layoffs remain extremely limited despite signs of slower hiring.

The resilient figures could reinforce expectations that the Federal Reserve (Fed) will maintain a restrictive monetary policy stance for longer. US Treasury yields and the broader Dollar Index moved higher, the latter up 0.4%, following the release, providing additional support to USD/JPY.

Investors will now focus on Japan’s National Consumer Price Index data for June, due later on Thursday. Core inflation, which excludes fresh food, is expected to accelerate to 1.6% YoY from 1.4%, partly due to higher energy prices. Headline inflation previously stood at 1.5%, while the index excluding food and energy was 1.8%.

A stronger-than-expected inflation report could strengthen expectations of further Bank of Japan (BoJ) interest rate increases and support the Japanese Yen. Conversely, softer figures could allow USD/JPY to remain elevated near the 164.00 level.

Short-term technical analysis:

On the 4-hour chart, USD/JPY trades at 163.95, retaining a bullish near-term tone as it holds well above both the 20-period Simple Moving Average (SMA) at 162.97 and the 100-period SMA at 162.28. The pair is pressing against an immediate horizontal cap at 163.97, while the Relative Strength Index (RSI) around 80 signals strongly overbought conditions that could slow the advance even if underlying trend support remains intact.

On the downside, initial support emerges at 163.65, with further cushions at 163.49 and 163.29 before the bullish structure would be tested closer to the 20-period SMA at 162.97 and the 100-period SMA at 162.28. On the topside, a clear break above the 163.97 resistance level would reopen the path for additional gains, though stretched momentum suggests any upside extension could be vulnerable to a corrective pullback toward the mentioned support band.