Fundamental analysis USDJPY for 14.03.2024

During the Asian session on Thursday, the Japanese Yen (JPY) grappled to find substantial momentum, remaining ensnared within the prior day's extensive trading boundaries against its American counterpart. Japan's recent spring wage negotiations unveiled a harmonious agreement between most corporations and trade unions regarding wage increases, potentially heralding an imminent shift in the Bank of Japan's (BoJ) policy stance.

In a significant turn, major Japanese corporations embraced the Union's wage hike proposition fully, potentially facilitating the BoJ's departure from negative interest rates, possibly as early as the forthcoming week, thereby bolstering the Japanese Yen. Reports from Japanese media hint at growing support among BoJ policymakers for a policy recalibration at the upcoming meeting, fueled by the substantial pay raises by prominent companies, inching closer to the 2% price stability objective.

Sources acquainted with BoJ deliberations suggest a prevailing sentiment within the central bank that it's nearing a policy shift, irrespective of whether the first rate hike since 2007 materializes in March or during the April meeting. However, BoJ Governor Kazuo Ueda's recent remarks underscored a cautious approach, emphasizing the central bank's intent to ease policy only when reaching the 2% inflation target, tempering expectations for an immediate interest rate hike.

Conversely, the USD grapples with a lack of substantial traction as market participants clamor for clearer insights into the Federal Reserve's (Fed) monetary policy trajectory. Despite slightly upbeat US consumer inflation data released earlier, speculations persist regarding the Fed's stance, with markets still pricing in a potential rate cut in June, thus keeping USD bulls on the back foot.

The upcoming release of US macroeconomic indicators - Retail Sales, Producer Price Index (PPI), and Weekly Initial Jobless Claims - holds the potential to offer short-term trading opportunities ahead of pivotal central bank events next week.

Trends in producer prices, indicative of demand dynamics, and retail sales figures, reflecting consumer spending patterns, will be critical factors shaping market expectations. The near-term trajectory of the USD/JPY pair hinges on the interplay between US economic data, wage negotiations in Japan, and the BoJ's policy stance. Weaker-than-anticipated US data coupled with BoJ support for departing from negative rates could tilt the monetary policy divergence in favor of the Yen, with the wage report on Friday looming as a crucial determinant.

Technical analysis and scenarios:

Considering that the Alligator indicator is sleeping along with the twisted moving averages, this suggests that the market is currently in a consolidation phase without a clear trend. However, the presence of the Awesome Oscillator (AO) and Accelerator Oscillator (AC) in the red zone and near the zero level indicates an increase in bearish momentum. This situation often indicates a potential downward move.

Main scenario (SELL)

Recommended entry level: 146.800

Take profit: 146.150

Stop loss: 147.550

Alternative scenario (BUY)

Recommended entry level: 148.700

Take profit: 149.450

Stop loss: 148.150