USD/JPY slips 0.5% as yen strengthens ahead of NFP

USD/JPY fell 0.5% to 161.70 on July 2, 2029, after the yen strengthened around 2 p.m. Singapore time during the Asian-to-London trading handover. The decline occurred without an official announcement from Japanese authorities.

The yen's recovery followed a brief move below 161.95, a level that had acted as resistance since early July 2024. People familiar with the matter described Japanese officials as abandoning prior warnings and signalling a more targeted effort to raise the cost of betting against the currency. There has been no formal confirmation of intervention.

Economic factors have generally supported a weaker yen. Brent and WTI crude traded below $75 a barrel, which has kept upward pressure on Japanese inflation low and reduced the case for earlier Bank of Japan tightening. The two-year yield gap between US Treasuries and Japanese Government Bonds widened to about 2.79 percentage points at the time of the move, making short-term US fixed income relatively more attractive.

A stronger US jobs report for June could increase expectations of tighter Federal Reserve policy, which would push two-year US yields higher and widen the US-Japan yield gap further, potentially encouraging additional dollar buying.

Large speculative positions in yen futures are sizeable. Commitment of Traders data as of June 23, 2026 showed net short positions by large speculators of about 288,485 contracts. Crowded short positions can amplify market moves and may increase the effectiveness of any deliberate official action to support the yen.

Economists and traders note that a materially weaker yen could affect domestic demand and consumer confidence in Japan, which might offset some benefits exporters receive from a cheaper currency. Authorities may aim to limit rapid declines while allowing market-driven adjustments.

Technically, traders are watching support near 160.90, which aligns with the 20-day moving average. A sustained break and hourly close below 160.90 could expose lower supports at 160.30 and the 159.75–159.45 zone around the 50-day moving average. On the upside, an hourly close above 161.95 would restore a bullish outlook for USD/JPY, with targets near 162.73–162.97 and further resistance around 163.26.

Market participants will monitor the US nonfarm payrolls report for June for cues on Federal Reserve pricing and the likely direction of the US-Japan yield gap.