Daily Analysis For USD/JPY   13-06-2023

Daily Analysis For USD/JPY 13-06-2023

USD/JPY Analysis


Key Points: -


·       The USD/JPY pair has gained momentum, recovering from intraday losses, which were the first in three days.

·       Despite discouraging economic data from Japan, the dovish stance of the Bank of Japan (BoJ) is defended, while concerns related to the Federal Reserve (Fed) have spurred a rebound in the USD/JPY pair.

·       The direction of US inflation data is critical in confirming the market's expectations regarding the interest rate bias for the June Federal Open Market Committee (FOMC) meeting, and it is likely to favor the bears in the USD/JPY pair.

·       BoJ officials have explicitly dismissed any possibility of a policy change, but doubts persist among market participants.

Today's Scenario: -


The USD/JPY pair faces selling pressure during the Asian session on Tuesday, struggling to maintain the gains it achieved in the past two days. Currently trading below the mid-139.00s, the pair has declined by around 0.15% for the day, remaining within a familiar trading range observed over the past two weeks.


The US Dollar (USD) is weakened by growing expectations that the Federal Reserve (Fed) will likely refrain from raising interest rates in June. This has resulted in the USD reaching its lowest level since May 22 and serves as a primary factor for the downward pressure on the USD/JPY pair. Influential Fed officials have recently hinted at a pause in the central bank's ongoing policy tightening cycle, leading to a decline in US Treasury bond yields and further weighing on the Greenback.


Additionally, concerns about a global economic slowdown, coupled with the possibility of Japanese authorities intervening in the markets to support the domestic currency, have bolstered the safe-haven appeal of the Japanese Yen (JPY). This contributes to the negative sentiment surrounding the USD/JPY pair. However, expectations that the Bank of Japan (BoJ) will maintain its dovish stance may limit significant gains for the JPY and help mitigate losses for the pair, at least in the near term.


Notably, BoJ Deputy Governor Masazumi Wakatabe emphasized on Monday that there are strong reasons to continue with the current ultra-easy monetary policy measures. In contrast, Fed funds futures indicate that the markets are pricing in the possibility of a 25 basis points rate hike at the July Federal Open Market Committee (FOMC) meeting. These expectations were bolstered by surprise rate hikes from the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) last week, indicating that the fight against inflation is ongoing.


As a result, market focus will be on the release of the latest US consumer inflation figures scheduled for later in the early North American session. A stronger Consumer Price Index (CPI) reading would support the likelihood of further policy tightening by the Fed, providing some modest strength to the US Dollar and the USD/JPY pair. However, the immediate reaction is expected to be limited as traders await the upcoming key events: the FOMC decision on Wednesday and the BoJ meeting on Friday.


Diagram of USD/JPY: -

Economic Events: -


Date    Event                                                                                                                Impact    Currency

4:15     (New Zealand) Visitor Arrivals YoY                                                        Low      NZD

5:20     (Japan) BSI Large Manufacturing QoQ                                                Low      JPY

6:00     (Australia) Westpac Consumer Confidence Change                       High     AUD

6:00     (Australia) Westpac Consumer Confidence Index                           High     AUD

7:00     (Australia) NAB Business Confidence                                                 High     AUD

11:30   (Germany) Harmonised Inflation Rate MoM                                        Low      EUR

11:30   (Germany) Harmonised Inflation Rate YoY                                           Low      EUR

11:30   (Germany) Inflation Rate MoM                                                         Medium      EUR

11:30   (Germany) Inflation Rate YoY                                                            Medium      EUR

11:30   (Germany) CPI                                                                                             High      EUR

11:30   (United Kingdom) Average Earnings excl. Bonus (3Mo/Yr)              Low      GBP

11:30   (United Kingdom) Average Earnings incl. Bonus (3Mo/Yr)       Medium      GBP

11:30   (United Kingdom) Unemployment Rate                                               High      GBP

11:30   (United Kingdom) Claimant Count Change                                         High      GBP

11:30   (United Kingdom) Employment Change                                               High      GBP

11:30   (United Kingdom) HMRC Payrolls Change                                           Low      GBP

12:30   (Lithuania) Current Account                                                                    Low      EUR

12:30   (Spain) CPI                                                                                                  High      EUR

12:30   (Spain) Core Inflation Rate YoY                                                              Low       EUR

12:30   (Spain) Harmonised Inflation Rate MoM                                             Low       EUR

12:30   (Spain) Harmonised Inflation Rate YoY                                                Low       EUR

12:30   (Spain) Inflation Rate MoM                                                                     Low       EUR

12:30   (Spain) Inflation Rate YoY                                                                        Low       EUR

13:30   (China) Total Social Financing                                                               Low       CNY

13:30   (China) New Yuan Loans                                                                          Low       CNY

13:30   (China) M2 Money Supply YoY                                                               Low       CNY

13:30   (China) Outstanding Loan Growth YoY                                                Low       CNY

14:10   (Spain) 3-Month Letras Auction                                                             Low       EUR

14:30   (Euro Area) ZEW Economic Sentiment Index                            Medium        EUR

14:30   (Germany) ZEW Economic Sentiment Index                                    High        EUR

14:30   (Germany) ZEW Current Conditions                                                    Low        EUR

14:30   (United Kingdom) 10-Year Treasury Gilt Auction                             Low        GBP

14:40   (Italy) 3-Year BTP Auction                                                                     Low         EUR

14:40   (Italy) 7-Year BTP Auction                                                                     Low         EUR

14:40   (Italy) 30-Year BTP Auction                                                                  Low         EUR

15:00   (Germany) 5-Year Bobl Auction                                                          Low          EUR

15:15   (Euro Area) ECB Enria Speech                                                            Low          EUR

15:30   (Latvia) Current Account                                                                      Low         EUR

15:30   (United States) NFIB Business Optimism Index                            Low          USD

17:30   (Ecuador) Balance of Trade                                                                 Low          USD

18:00   (United States) Core Inflation Rate MoM                                 Medium          USD

18:00   (United States) Inflation Rate MoM                                                 High          USD

18:00   (United States) Core Inflation Rate YoY                                          High          USD

18:00   (United States) Inflation Rate YoY                                                    High          USD

18:00   (United States) CPI                                                                               High          USD

18:00   (United States) CPI s.a                                                                        High          USD

18:15   (Germany) Current Account                                                                Low          EUR

18:25   (United States) Redbook YoY                                                             Low          USD

19:30   (United Kingdom) BoE Gov Bailey Speech                              Medium         GBP

20:30   (United Kingdom) BoE Dhingra Speech                                         Low          GBP

21:00   (United States) 52-Week Bill Auction                                              Low          USD

22:30   (United States) 30-Year Bond Auction                                            Low          USD

Buy Scenario: -


The USD/JPY currency pair has been trading within a narrow range between 139.89 (R1) and 139.48 (PIVOT) for the past three weeks, indicating a lack of clear direction and suggesting a potential increase in volatility. Traders are eagerly awaiting a catalyst that could break the current deadlock. Two significant events, namely today's release of the Consumer Price Index (CPI) report and the highly anticipated Federal Reserve interest rate decision on Wednesday, have the potential to provide the necessary impetus. Till we did not advise to buy in USD/JPY.


Sell Scenario: -


Currently, the USD/JPY pair is hovering around the midpoint at 139.60, indicating neutral momentum. Given the prevailing upward trend, buyers are likely to enter the market if the pair experiences a pullback towards the 139.48 (PIVOT) level, as they search for value opportunities. However, a failure to hold this level could open the door for a downward movement, potentially leading to a near-term decline towards 139.19 (S1).


In summary, the overall bias for the USD/JPY pair remains tilted to the upside, with the forthcoming news events on Tuesday and Wednesday expected to determine whether traders will take advantage of buying opportunities during pullbacks or chase the market's strength driven by significant developments. Till we did not advise to sell the position in USD/JPY.


Support and Resistance Level: -

Support          Resistance  

S1 139.19   -   R1 139.89

S2 138.78  -   R2 140.18

S3 138.49  -   R3 140.59


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