Fundamental analysis of USD/JPY

USD/JPY pair is active in the market, and future economic data from Japan may affect this trend. Investors are expecting a possible change in the monetary policy of the Bank of Japan to prevent a financial crisis. In its latest forecast, the Japanese government estimates inflation for the current fiscal year at 2.6%, which is sharply higher than the January estimate of 1.7%. In addition, the government lowered its economic growth forecast from 1.5% to 1.3%. 

The USD/JPY pair will be influenced by the risk-on market sentiment and the reaffirmation of monetary policy in many markets. In addition, USD/JPY buying has remained steady, breaking above 140.500 on Friday. The monetary policy gap between the Bank of Japan's conservative policy and the Fed's tightening policy has led to the yen's depreciation against major currencies. The latest data from the U.S. Labor Department showed that the number of people filing for unemployment benefits fell to 228,000 in the week ended July 15, the lowest since mid-May. Despite the continued decline in the FRB Philadelphia manufacturing and sales surveys in June, expectations for a 25 basis point Fed rate hike have strengthened. 

On the other hand, Japan's balance sheet is poised to post a surplus for the first time since July 2021, easing somewhat the strain on the economic recovery. Japan's trade deficit widened to 43 billion yen compared to the forecasted deficit of 46.7 billion yen. In June, the country's consumer price index (CPI) fell from 3.2% to 3.3% year-on-year, below expectations of a 3.5% rise. Despite this development, Bank of Japan (BoJ) Governor Kazuo Ueda is expected to continue his monetary policy. 

Investors' attention now turns to the BoJ's next interest rate decision, and Governor Ueda is expected to continue his dovish policy that will keep inflation at around 2%.

Technical Analysis and Scenarios:

The USD/JPY pair is currently trading at 141.100 and the Stochastic (Stoch(5,3,3,3)) value of 68.5144 signals continued upward momentum but is approaching overbought territory. In addition, the MACD (12,26,9) value at 0.2859, located above the signal line at 0.1710, indicates a bullish trend. Also, the price is in the upper range of the Bollinger Bands, which confirms the upward movement and potential price range extension. Given these indicators, the main scenario would be to open long positions (buy). 

Main scenario (BUY)

Recommended entry level: 141.880.

Take Profit: 143.000.

Stop Loss: 141.100.

Alternative scenario (SELL)

Recommended entry level: 140.000.

Take Profit: 138,680.

Stop loss: 141.100.