Published on Jun 14, 2023

Daily Analysis For USD/JPY 14-06-2023

USD/JPY Analysis

Key Points: -

· USD/JPY currency pair experiences a slight decline, although it lacks significant momentum to continue its downward movement.

· The Japanese yen, considered a safe-haven currency, is benefiting from a more cautious market sentiment, which is acting as a hindrance for the pair.

· The potential for further downside appears limited, as market attention remains focused on the crucial upcoming FOMC decision.

Today's Scenario: -

During the Asian trading session on Wednesday, the USD/JPY pair is observed trading within a narrow range, consolidating its recent gains. Currently, the pair hovers just above the psychological level of 140.00. Traders have adopted a cautious approach and eagerly await the outcome of the highly-anticipated FOMC policy meeting.

Scheduled for later today at 18:00 GMT, the Federal Reserve (Fed) is expected to announce its decision, widely anticipated to indicate a pause in its year-long cycle of interest rate hikes. This outlook has been reinforced by the latest US consumer inflation data released on Tuesday. The Consumer Price Index (CPI) showed minimal growth in May, with the annual increase being the smallest in over two years. According to the US Labor Department, the headline CPI rose by only 0.1% in May, following a 0.4% increase in April. This marks the 11th consecutive month of easing price pressures.

The year-on-year CPI growth slowed down from 4.9% in April to 4.0% in May, representing the smallest increase since March 2021. However, this figure still exceeds the Fed's 2% target, which could enable the Fed to maintain its hawkish stance. Additionally, the expectation of another 25 basis points rate hike at the July FOMC meeting, as reflected in market pricing, has led to a sharp increase in US Treasury bond yields overnight. This development provides some support to the US Dollar (USD), acting as a favorable factor for the USD/JPY pair and limiting potential significant declines.

Market sentiment leading up to the important central bank event exhibits signs of anxiety, reflected in a generally cautious attitude and a preference for safe-haven assets such as the Japanese Yen (JPY). As a result, some pressure is exerted on the USD/JPY pair. Nevertheless, it is expected that the Bank of Japan (BoJ) will maintain its accommodative stance to support the economy and sustain recent positive indicators, thereby curbing the strength of the JPY. Consequently, it is advisable to exercise caution before aggressively betting on a bearish movement in the USD/JPY pair or anticipating a substantial intraday corrective decline.

Diagram of USD/JPY: -

Economic Events: -

Date Event Impact Currency

02:00 (United States) API Crude Oil Stock Change Medium USD

04:15 (New Zealand) Current Account Medium NZD

05:30 (New Zealand) Food Inflation YoY Low NZD

10:00 (Netherlands) Balance of Trade Low EUR

10:30 (Finland) Inflation Rate YoY Low EUR

10:30 (Finland) Inflation Rate MoM Low EUR

10:30 (Finland) CPI Low EUR

11:30 (United Kingdom) GDP 3-Month Avg Medium GBP

11:30 (United Kingdom) Goods Trade Balance Non-EU High GBP

11:30 (United Kingdom) Balance of Trade Low GBP

11:30 (United Kingdom) Construction Output YoY Low GBP

11:30 (United Kingdom) Industrial Production YoY Low GBP

11:30 (United Kingdom) Industrial Production MoM Medium GBP

11:30 (United Kingdom) Manufacturing Production YoY Low GBP

11:30 (United Kingdom) Manufacturing Production MoM Medium GBP

11:30 (United Kingdom) Goods Trade Balance High GBP

11:30 (United Kingdom) GDP YoY Low GBP

11:30 (United Kingdom) GDP MoM High GBP

11:30 (Germany) Wholesale Prices MoM Medium EUR

11:30 (Germany) Wholesale Prices YoY Medium EUR

12:30 (China) FDI (YTD) YoY Medium CNY

12:30 (Slovakia) Inflation Rate MoM Low EUR

12:30 (Slovakia) Inflation Rate YoY Low EUR

12:30 (Slovakia) Core Inflation Rate MoM Low EUR

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

12:30 (Slovakia) CPI Low EUR

13:30 (France) IEA Oil Market Report Medium EUR

14:30 (Euro Area) Industrial Production MoM Medium EUR

14:30 (Euro Area) Industrial Production YoY Low EUR

14:30 (Montenegro) GDP Growth Rate YoY Low EUR

15:00 (Germany) 10-Year Bund Auction Medium EUR

15:30 (Portugal) Inflation Rate MoM Low EUR

15:30 (Portugal) Inflation Rate YoY Low EUR

15:30 (Portugal) CPI Low EUR

15:30 (Ireland) Residential Property Prices YoY Low EUR

15:30 (Ireland) Residential Property Prices MoM Low EUR

16:30 (United States) MBA 30-Year Mortgage Rate Medium USD

16:30 (United States) MBA Mortgage Applications Low USD

16:30 (United States) MBA Mortgage Refinance Index Low USD

16:30 (United States) MBA Mortgage Market Index Low USD

16:30 (United States) MBA Purchase Index Low USD

17:00 (United Kingdom) NIESR Monthly GDP Tracker Low GBP

18:00 (Canada) New Motor Vehicle Sales Low CAD

18:00 (United States) Core PPI MoM Medium USD

18:00 (United States) Core PPI YoY Low USD

18:00 (United States) PPI YoY Low USD

18:00 (United States) PPI MoM High USD

20:00 (United States) EIA Heating Oil Stocks Change Low USD

20:00 (United States) EIA Refinery Crude Runs Change Low USD

20:00 (United States) EIA Crude Oil Stocks Change Medium USD

20:00 (United States) EIA Distillate Stocks Change Low USD

20:00 (United States) EIA Gasoline Production Change Low USD

20:00 (United States) EIA Crude Oil Imports Change Low USD

20:00 (United States) EIA Gasoline Stocks Change Medium USD

20:00 (United States) EIA Cushing Crude Oil Stocks Change Low USD

20:00 (United States) EIA Distillate Fuel Production Change Low USD

21:00 (United States) 17-Week Bill Auction Low USD

23:30 (United States) Fed Interest Rate Decision High USD

23:30 (United States) FOMC Economic Projections High USD

23:30 (United States) Interest Rate Projection - 1st Yr Medium USD

23:30 (United States) Interest Rate Projection - 2nd Yr Medium USD

23:30 (United States) Interest Rate Projection - Current Medium USD

23:30 (United States) Interest Rate Projection - Longer Medium USD

Buy Scenario: -

If a recovery occurs, the initial targets could be the previous monthly high around 140.90, followed by the round figure of 141.00.

Subsequently, the attention of USD/JPY bulls may shift to the 61.8% Fibonacci Expansion (FE) level of the price movement between May 16 and June 01, located near 141.70.

If the pair manages to sustain strength above 141.70, the threshold of 142.00 and the late November 2022 peak around 142.25 may pose challenges for the buyers. Till we did not advise to buy in USD/JPY.

Sell Scenario: -

The Yen pair remains in focus for bullish traders unless it manages to break below the mentioned trend line, currently positioned around 139.90.

Even if the quote breaches the 139.90 level, there are potential challenges for USD/JPY sellers in the form of the 100-bar Exponential Moving Average (EMA) around 139.10 and the monthly low near 138.40.

Should the quote decline beyond 138.40, the 200-EMA support at 138.00 will serve as the final defense for USD/JPY buyers. Till we did not advise to sell the position in USD/JPY.