The report on USDJPY is here and it seems something interesting is afoot in the currency pair.
The Japanese yen continues to gain against the dollar for the third week in a row last week. As traders remain cautious ahead of the Bank of Japan’s policy meeting on Wednesday, which could see the possibility of a rate hike. The BoJ is expected to raise interest rates by 10 basis points to 0.1% and is widely expected to announce its bond buying plan.
JPY may also find support as traders may unwind their carry positions ahead of the BOJ’s decision. Japanese currency diplomat Masato Kanda told the G20 group on Friday that exchange rate fluctuations have a negative impact on the Japanese economy. According to Reuters, Kanda noted the increasing probability of a soft landing and emphasized the need to control the economy and implement exactly the necessary measures.
In addition, the US dollar faces challenges as cooling inflation and easing labor market conditions in the US fueled expectations that the Federal Reserve (Fed) will cut interest rates three times this year starting in September.
On Friday, the US personal consumption expenditures (PCE) price index rose 2.5% in June from a year ago, slightly less than May’s 2.6%, which was in line with market expectations. On a monthly basis, the PCE price index rose 0.1% after remaining flat in May.
US core price inflation, which excludes volatile food and energy prices, also rose to 2.6% in June, in line with May’s increase and topping forecasts of 2.5%. The core PCE price index rose 0.2% in June, compared with 0.1% in May.
Tokyo’s consumer price index rose 2.2% year-on-year in July, slightly lower than the previous increase of 2.3%. Tokyo’s consumer price index (excluding fresh food and energy) rose 1.5%, compared with a 1.8% increase a year earlier. In addition, the consumer price index (excluding fresh food) rose by 2.2% in July, which was in line with market expectations.
Last week, Japanese Finance Minister Shunichi Suzuki, Chief Cabinet Secretary Yoshimasa Hayashi and foreign exchange diplomat Masato Kanda avoided commenting on currency issues, Reuters reports.
Technical Outlook of USDJPY
The USDJPY pair fell by more than two percent last week. The pair fell from a high of 157.6140 and made a low of 153.014.
On the chart above, the pair has broken the ascending channel support, indicating further pressure. Apart from that, the RSI and its 9 SMA also give a negative crossover.
Therefore, a break below 152.95 is expected to extend the recent decline. And the pair may fall to 151.00-148.90 in the coming days. At the top, a huge resistance can be seen at 155.80, above which the pair can recover to 159.00-160.50.
The general sentiment depends on the policy decisions of the BOJ, the forecast of a rate increase or decision is likely to increase pressure or vice versa.
Happy Trading!
Commodity Samachar
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