Abstract:JPY risks a potential drop to weekly low’s, BoJ to continue monetary policy easing.
The USDJPY pair trades positively to test the first key resistance at 127.40, keeping its stability below it until now, accompanied by witnessing clear overbought signals through stochastic RSI, waiting to motivate the price to resume the correctional bearish trend, which targets 125.00 level as a next main station.
Therefore, the negative scenario will remain valid for the upcoming period unless breaching 127.40 followed by 128.20 levels and holding above them.
On the fundamental front of the Yen monetary policy, Bank of Japan (BOJ) Haruhiko Kuroda said in a statement on Thursday, not to expect inflation to stay around 2% next year and the year after.
BoJ Governor Kuroda also added that the BoJ needs to continue with monetary policy easing, and when it will exit, the BoJ will likely combine rate hike with balance sheet reduction through specific means, timing will depend on economic, price, and financial developments at the time. On the contrary, Japanese Prime Minister Fumio Kishida said that the Bank of Japan (BOJ) should make some efforts to achieve the targeted inflation rate of 2%.
The yen bulls have not responded much to the comments of the BoJ Governor and the Japanese Prime minister, as the Japanese economy has restricted the growth catalysts, faces external supply chain issues, and the broader strengthening of the USD, which are hurting the yen on a broader note.
The yen weakens further as Fed Chair Powell's cautious remarks influence market sentiment. USD/JPY remains around 161, with resistance at 162, driven by Powell's comments and upcoming US CPI data. June's lower-than-expected PPI in Japan adds pressure on the yen. The sentiment is bullish for USD/JPY, supported by strong US economic indicators. Key influences include Federal Reserve signals, US economic data, and Japan's PPI. Potential movement for USD/JPY could see it testing 162 resistance.
The U.S. ISM Manufacturing PMI dropped to 48.5 in June, below expectations, but the dollar rebounded after a Supreme Court ruling in favor of Trump. Investors await U.S. job data for hints on potential Federal Reserve rate cuts. Despite rising U.S. bond yields, gold remains strong near $2300. If it breaks above the 50-day moving average of $2337, it could reach $2390-$2400, but faces resistance at $2339.21. A drop below $2323.29 would weaken the bullish signal; watch for a breakout in the $2291.
The yen continues to weaken against major currencies, with USD/JPY potentially climbing above 165. Japan's officials express concerns, hinting at potential intervention. Stable domestic indicators fail to support the yen amid robust USD performance.
The USD/JPY pair is predicted to increase based on both fundamental and technical analyses. Fundamental factors include a potential easing of aggressive bond buying by the Bank of Japan (BoJ), which could lead to yen depreciation. Technical indicators suggest a continuing uptrend, with the possibility of a correction once the price reaches the 157.7 to 160 range.