Fundamental analysis of USD/JPY

The USD/JPY currency pair recently gained significant momentum, finding support in the area of 144.650. Japanese Finance Minister Shunichi Suzuki said that the government will take action if the Japanese yen weakens too much. This statement gave some support to the yen, preventing the dollar from rallying. The currency market is currently cautious. Economic uncertainty has played a role due to rising Chinese borrowing costs and weak macroeconomic data. In particular, China's manufacturing PMI fell to 49 from 48.8 in June, showing a downward trend for three straight months. On the other hand, the services business activity index was 53.2 points, higher than expected but lower than in the previous month (54.5). 
 
 The main factor affecting the USD/JPY pair is the difference in monetary policy between the Bank of Japan (BoJ) and the Federal Reserve. The BoJ remains dovish and negative interest rates will remain in place next year. Governor Kazuo Ueda has also not announced any upcoming policy changes or yield curve controls. By contrast, the Federal Reserve is showing a hawkish outlook, with borrowing costs likely to rise as much as 50 basis points by the end of the year. 

 The dollar also got a boost from positive economic data in the US, including a drop in initial weekly jobless claims and an upward revision to first-quarter GDP growth. Improved labor market conditions and stronger economic data made the dollar more attractive as an investment, pushing Treasury yields higher and supporting the outlook for further price gains for the USD/JPY pair. 

 A statement from Fed Chairman Jerome Powell also confirmed the possibility of a rate hike at the July FOMC meeting. Rafael Bostic, president of the Federal Reserve Bank of Atlanta, also reiterated his view that a rate adjustment is needed. 

 Traders and investors are now closely watching the release of the main PCE U.S. price index, which is the Fed's preferred indicator of inflation. This data will be key in shaping market expectations on the path of future rate hikes and their impact on USD/JPY. The fundamental backdrop suggests that the currency pair is on the right track for the third week in a row and ready to continue its recent uptrend.

Technical analysis and scenarios:

Stochastic is currently in overbought territory, but if there is enough momentum, it may not prevent an upward move. Moreover, Stoch value is approaching the overbought level, which may indicate a forthcoming downward movement. 

Main scenario (BUY)

Recommended entry level: 144.700.

Take Profit: 145.500.

Stop loss: 144,000.

Alternative scenario (SELL)

Recommended entry level: 144.400.

Take Profit: 143,000.

Stop loss: 144.800.