- At the start of this important trading week, the USD/JPY price rose to the 157.20 resistance level as investors and markets prepare for important and influential US and Japanese events.
- Moreover, its recent gains came as the US dollar rose on the back of strong US jobs data that reduced the likelihood of the Federal Reserve (the US central bank) cutting interest rates this year.
Also, investors became cautious ahead of the US Federal Reserve's policy decision and the main US inflation reading this week.
Locally, according to the results of the economic calendar, revised data showed that the Japanese economy contracted at an annual rate of 1.8% in the first quarter, which is less than the 2% contraction in the initial report and the 1.9% contraction that analysts expected. Also, the country's current account surplus exceeded expectations in April. Meanwhile, investors are looking ahead to the Bank of Japan’s policy decision on Friday, with focus on whether the central bank will reduce its monthly bond purchases. BoJ Governor Kazuo Ueda reiterated last week that the central bank will gradually shrink its massive balance sheet, although the timing remains uncertain.
Concurrently, the yield on the benchmark 10-year Japanese government bond jumped back above 1% after revised data showed Japan’s economy shrank at an annualized rate of 1.8% in the first quarter, slower than the 2% contraction in the initial report and the 1.9% contraction analysts had expected. Furthermore, the country’s current account surplus also beat expectations in April. Meanwhile, investors are looking ahead to the Bank of Japan’s policy decision on Friday, with focus on whether the central bank will reduce its monthly bond purchases. Correspondingly, Domestic yields are tracking higher U.S. bond yields as strong U.S. jobs data prompted traders to scale back expectations for a rate cut from the Federal Reserve.
On the global central bank policy front, economists are divided on how many Fed rate cuts officials will signal for 2024 in their policy meeting this week, following recent high inflation numbers. Overall, policymakers are likely to backtrack on their long-held expectations of three US rate cuts this year, but it's a close call on whether they will stick to two rate cuts or not. A majority of 41% of economists expect the "dot plot" to show two cuts, while 41% expect the projections to show just one cut or no cuts at all, according to a Bloomberg survey.
Overall, officials are confident in keeping the US rate steady in the 5.25% to 5.5% range for the seventh straight meeting next week. This week, chair Jerome Powell and his colleagues will update their economic and rate projections at the June 11-12 meeting for the first time since March. The lower cuts point to a later start to cuts. So far, this could have implications for the November presidential election, although Fed officials are uniformly saying their decisions are based solely on economic considerations.
Top Forex Brokers
USD/JPY Technical Analysis and Expectations Today
USD/JPY is likely to remain bullish as markets and investors react to the US inflation figures, the Fed’s policy statement and the Bank of Japan’s announcement at the end of the week. Based on the daily chart attached, bull gains could push USD/JPY towards the 157.75 and 158.30 resistance levels and the 160.00 psychological resistance unless Japan intervenes in the currency markets to halt further yen decline. Until now, the overall trend for USD/JPY is likely to remain bullish as long as the divergence between the Fed and the Bank of Japan continues.
Ready to trade our daily Forex analysis? We’ve made a list of the best forex trading accounts worth trading with.