Important events today:

03.07 13:45 UTC: USD – S&P Global Composite PMI.

The pair is changing its short-term balance following statements from Tokyo. Finance Minister Satsuki Katayama stated that authorities are ready to respond to currency fluctuations at any time if necessary and are maintaining contact with their American counterparts. The comments came after a sharp strengthening of the Yen, which had hit a multi-year low earlier in the week, thereby increasing the significance of the risk of official action.

Simultaneously, the June US employment report weakened the arguments for an imminent Fed rate hike: payrolls grew by only 57k against the expected 110k, and short-term US bond yields declined. The reduction in interest rate support for the dollar is crucial for the pair, where the rate differential has been the backbone of dollar demand. A Japanese government council representative urged the Bank of Japan to continue moderate rate hikes.

The persistent interest rate gap limits the potential for a sustained strengthening of the Yen, and Japanese authorities have not confirmed conducting an intervention. However, the combination of weak US labor market data with Tokyo’s official warning alters the risk balance for USDJPY. Within the baseline scenario, priority remains with a further decline in the pair until US yields return to growth.

Recommendations: SELL 161.00, SL 161.35, TP 159.95.