Fundamental analysis of USD/JPY
The USD/JPY currency pair had a bright start to the week as there was no significant economic data from Japan or China on the agenda today. The lack of an influential indicator caused the pair to fall slightly and the US dollar regained some of its gains from last Friday.
Nonetheless, the U.S. dollar remained somewhat dominant, fueled by the hawkish sentiment entrenched at the Fed. Market participants are betting on the possibility of a Fed rate hike in July, which supports the U.S. dollar.
In contrast, Japanese inflation data released last Friday showed that the annual inflation rate fell to 3.2% from 3.5% in May. In particular, closely watched core inflation followed a similar trajectory, rising from 3.4% to 3.2%. A further slowdown in inflation is necessary for the Bank of Japan (BoJ) to maintain its very loose monetary policy.
However, once the situation has stabilized, the BoJ has faithfully delivered on its policy promises. It is waiting for more data, including inflation data from Tokyo, to be released on Friday. Such monitored figures could prompt Japanese banks to reconsider their stance. In addition, according to a summary of the Bank of Japan's comments, a change in monetary policy seems premature at this stage. Reuters reported that small Japanese companies are inclined to raise wages and increase investment. The Bank of Japan has focused on wage inflation rather than cost inflation in order to meet its 2% sustainable inflation target.
However, there are clear divisions within the Bank of Japan. One policymaker advocates radical changes in yield curve management (YCC) to counter interest rate shocks. This commentary contrasts sharply with the views of Bank of Japan Governor Kazuo Ueda, who believes the current interest rate policy should remain unchanged for the time being in order to create conditions for stable inflation at 2%. .
In short, USD/JPY was somewhat held back by a lack of economic data earlier in the week. However, the US dollar remained strong thanks to the hawkish stance of the US Federal Reserve (Fed). In Japan the Bank of Japan's inflation data and inconsistent monetary policy could play a role in the USD/JPY pair's near-term movement.
Technical analysis and scenarios:
The Stochastic indicator is not in overbought territory and the MACD is above its signal line, which may indicate bullish momentum.
Recommended entry level (BUY): 142.970.
Take Profit: 144.500.
Stop loss: 142.100.
Recommended entry level (SELL): 142.970.
Take Profit: 141.270.
Stop Loss: 143.200.