Published on Jun 16, 2023

Daily Analysis For USD/JPY 16-06-2023

USD/JPY Analysis

Key Points: -

· USD/JPY is currently experiencing an uptick as it reaches a new intraday high, reversing its earlier weakness following the Bank of Japan's (BoJ) decision.

· The BoJ's verdict met market expectations by keeping the benchmark rate and Yield Curve Control (YCC) unchanged.

· Traders are now awaiting more details from BoJ Governor Ueda's statements and also looking towards the release of the US Michigan Consumer Sentiment Index for clearer directions in the USD/JPY pair.

Today's Scenario: -

USD/JPY is currently seeing an increase in buying pressure, pushing it to a new intraday high near 110.70. This comes as the Bank of Japan (BoJ) has announced its decision to keep the monetary policy unchanged, which was in line with market expectations. The Yen pair's upward momentum is further supported by the US Dollar's consolidation following significant losses the previous day and a corrective bounce in yields.

The BoJ has maintained the short-term interest rate target at -0.1% and continues to guide the 10-year Japanese Government Bond (JGB) yields within the range of +/-0.50%, according to the latest update from the monetary policy meeting. The central bank has also reassured investors regarding inflation, stating that the recent increase in the Consumer Price Index (CPI) to around 3.5% is mainly due to pass-through effects.

Meanwhile, the US Dollar Index (DXY) has started to recover, partially reversing its significant decline from the previous day, and is currently trading around 102.30. The decline in the US Dollar was driven by mixed US economic data and market uncertainty regarding the likelihood of a July rate hike by the Federal Reserve, despite policymakers' statements to that effect on Wednesday.

The US dollar's rebound can be attributed to slightly higher Treasury bond yields and a cautious market sentiment ahead of second-tier data releases. Additionally, approximately 70% of market participants are currently betting on a July rate hike by the Federal Reserve, as indicated by the CME's FedWatch Tool.

After the initial reaction to the BoJ decision, market focus will turn to Governor Kazuo Ueda's press conference, scheduled for 06:00 AM GMT, for further insights. Although Governor Ueda has previously stated that there is no need for any changes to the current monetary policy, any hints of a potential exit from ultra-easy measures in the future may provide some respite for USD/JPY bulls.

Subsequently, the market will closely monitor the preliminary readings of the Michigan Consumer Sentiment Index (CSI) for June and five-year inflation expectations, which will play a crucial role in providing clear directions for USD/JPY, particularly considering the recent easing of expectations regarding a more hawkish stance by the Federal Reserve.

Diagram of USD/JPY: -

Economic Events: -

Date Event Impact Currency

01:30 (United States) Foreign Bond Investment Low USD

01:30 (United States) Net Long-term TIC Flows Medium USD

01:30 (United States) Overall Net Capital Flows Low USD

04:00 (New Zealand) Business NZ PMI Medium NZD

08:30 (Japan) BoJ Interest Rate Decision High JPY

12:30 (Austria) Inflation Rate MoM Low EUR

12:30 (Austria) Inflation Rate YoY Low EUR

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

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

12:30 (Austria) CPI High EUR

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

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

12:30 (United States) Fed Bullard Speech Medium USD

13:30 (European Union) ECOFIN Meeting Medium EUR

13:30 (Italy) Inflation Rate YoY Medium EUR

13:30 (Italy) Harmonised Inflation Rate MoM Low EUR

13:30 (Italy) Harmonised Inflation Rate YoY Low EUR

13:30 (Italy) Inflation Rate MoM Low EUR

13:30 (Italy) CPI High EUR

14:30 (Euro Area) Inflation Rate MoM Low EUR

14:30 (Euro Area) Core Inflation Rate YoY Low EUR

14:30 (Euro Area) Inflation Rate YoY Medium EUR

14:30 (Euro Area) Labour Cost Index YoY Low EUR

14:30 (Euro Area) Wage Growth YoY Low EUR

14:30 (Euro Area) CPI High EUR

14:30 (Malta) Inflation Rate YoY Low EUR

15:30 (Portugal) PPI YoY Low EUR

15:30 (Portugal) PPI MoM Low EUR

17:15 (United States) Fed Waller Speech Medium USD

18:00 (Canada) Foreign Securities Purchases Low CAD

18:00 (Canada) Foreign Securities Purchases by Canadians Low CAD

18:00 (Canada) Wholesale Sales MoM Low CAD

19:30 (United States) Michigan Consumer Sentiment High USD

19:30 (United States) Michigan Inflation Expectations Low USD

19:30 (United States) Michigan Current Conditions Low USD

19:30 (United States) Michigan 5 Year Inflation Expectations Low USD

19:30 (United States) Michigan Consumer Expectations Low USD

22:30 (United States) Baker Hughes Oil Rig Count Low USD

22:30 (United States) Baker Hughes Total Rig Count Low USD

Buy Scenario: -

Exponential Moving Averages (EMAs), bullish signals can be observed for USD/JPY. The pair is currently trading above the 50-day EMA, which is located at 139.82. The 50-day EMA has also moved further away from the 100-day EMA, indicating a bullish trend. Furthermore, the 100-day EMA has widened from the 200-day EMA, reinforcing the bullish signals.

If USD/JPY manages to hold above the 50-day EMA (139.82), it would provide support for a potential breakout above the resistance level at R1 (141.26) and target the next resistance level at R2 (142.16). Till we did not advise to buy in USD/JPY.

Sell Scenario: -

However, if the pair falls below the 50-day EMA (139.82), it would bring the support level at S1 (139.70) and the 100-day EMA (139.33) into focus. A decline below the 50-day EMA would indicate a bearish signal for USD/JPY. Till we did not advise to sell the position in USD/JPY.