Fundamental analysis USDJPY for 01.04.2024

The Japanese Yen (JPY) initiates the week with a a softer note against the US Dollar (USD), yet lacks significant momentum, remaining ensconced within a familiar range sustained over the preceding fortnight. The cautious stance of the Bank of Japan (BoJ) regarding further policy tightening, coupled with the prevailing risk-on sentiment, continues to exert downward pressure on the safe-haven JPY. Nevertheless, the prospect of potential government intervention to counter excessive depreciation in the domestic currency restrains aggressive bearish bets on the JPY.

The Bank of Japan's Tankan Survey on Monday showed that business sentiment among major manufacturers fell to 11 points in the first quarter from 13 points in the previous survey, while period business satisfaction among major manufacturers increased to 34 points from  32 previously.

China's Caixin Manufacturing Purchasing Managers' Index (PMI) edged higher to 51.1 in March, as against the expansion of 50.9 in February, according to the latest data released on Tuesday.

Japan's Finance Minister Shunichi Suzuki said on Monday that speculative activity was behind the recent yen depreciation, suggesting  authorities remain willing to intervene in the market to offset excessive losses in the local currency. .

Japan's financial authorities reportedly decided at the last minute to move up an emergency meeting  originally scheduled for Thursday to Wednesday to maximize the impact of the sharp decline in the yen.

Conversely, in the United States, the release of the US Personal Consumption Expenditures (PCE) Price Index on Friday does little to alter expectations of an imminent interest rate cut by the Federal Reserve (Fed) in June. This narrative keeps USD bulls subdued, consequently capping potential upside for the USD/JPY pair.

The US Bureau of Economic Analysis reported on Friday that the Personal Consumption Expenditures (PCE) Price Index rose 0.3% in February, slightly lower than the 0.4% estimated, while the yearly rate edged up to 2.5% from the 2.4%.

The core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% on a yearly basis as compared to January's upwardly revised reading of 2.9%.

This moves the USD further away from its highest level since February 16, set last week, and could further hinder traders from positioning for  meaningful near-term gains in the USD/JPY pair.

US economic data, particularly the ISM Manufacturing PMI and the upcoming Nonfarm Payrolls (NFP) report, are poised to drive market sentiment at the onset of the new week. Meanwhile, commentary from FOMC members, including Lisa Cook, and reactions to the Personal Income and Outlays Report are anticipated to shape investor expectations regarding a potential Fed rate cut in June.

Technical analysis and scenarios:

The USD/JPY pair is currently trading at 151.345, showing signs of consolidation and lack of clear direction. The Alligator indicator indicates a sleeping market, with the moving averages twisted and the instrument flat. Additionally, both the Awesome Oscillator (AO) and Accelerator Oscillator (AC) are in the red area, with bars close to the zero level, signaling a strong confirmation for selling.

Main scenario (SELL)

Recommended entry level: 151.200

Take profit: 150.900

Stop loss: 151.500

Alternative scenario (BUY)

Recommended entry level: 151.500

Take profit: 151.800

Stop loss: 151.200