- The USD/JPY pair's upward trajectory took a temporary pause after the release of lower-than-expected US inflation figures.
- It caused the USD/JPY to retreat from the 157.37 resistance level to the 155.72 support level and settled around 156.70 at the start of trading on Thursday.
- For its part, the US Federal Reserve left the target range for federal funds unchanged at 5.25%-5.50% for the seventh consecutive meeting in June 2024, in line with expectations.
- Moreover, Policymakers do not expect it to be appropriate to lower US interest rates before they gain more confidence that inflation is moving sustainably towards 2%.
Meanwhile, the dot chart showed that policymakers see just one rate cut this year and four in 2025. In March, the Fed was forecasting three cuts in 2024 and three in 2025. Recently, the Fed made no changes to its GDP growth forecast and still sees the economy expanding by 2.1% in 2024, 2% in 2025 and 2026.
Meanwhile, according to the economic calendar results, Personal consumption expenditures (PCE) inflation for 2024 was revised up (2.6% vs. 2.4% in March expectations) and for next year (2.3% vs. 2.2%), but remained at 2% for 2026. Also, core PCE inflation was revised up to 2.8% in 2024 (vs. 2.6%) and 2025 (2.3% vs. 2.2%) but kept at 2% for 2026. Moreover, the unemployment rate is expected to remain at 4% in 2024, as expected in March, but is expected to edge up slightly to 4.2% in 2025 (vs. 4.1%).
Elsewhere, the Bank of Japan is widely expected to consider tapering its bond purchases at this week’s policy meeting, while also alerting investors to any signs of a rate hike next month. Moreover, Governor Kazuo Ueda’s policy board will keep its benchmark interest rate in a range of 0% to 0.1% at the end of its two-day meeting on Friday, according to all but one economist surveyed by Bloomberg. Recently, more than half said the bank would slow the pace of bond purchases from about 6 trillion yen ($38.2 billion) a month.
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USD/JPY Technical Analysis and Expectations Today
According to the performance on the daily chart attached, the USD/JPY price trend is still bullish and the resistance of 157.00 confirms the bulls' control. The trend will remain bullish as long as the divergence exists between the US Federal Reserve's policy and the Bank of Japan's as well as economic performance.
Furthermore, profit-taking sales will not be strong without Japanese intervention in the currency markets to stop further collapse of the yen exchange rate, which harms the Japanese economy, especially against the US dollar. Technically, breaking the current upward trend requires first moving below the support level of 153.30. Today, the US dollar price will be affected by the announcement of the US Producer Price Index reading and the number of weekly jobless claims.
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