Published on May 19, 2023

Daily Analysis For USD/JPY 19-05-2023

USD/JPY Analysis

Economic Events and Scenario for USD/JPY

Economic Events: -

GMT	Event	Impact	Currency
00:01	(United Kingdom) Gfk Consumer Confidence	High	GBP
00:30	(Japan) Core Inflation Rate YoY	Medium	JPY
00:30	(Japan) Inflation Rate MoM	Low	JPY
00:30	(Japan) Inflation Rate YoY	High	JPY
00:30	(Japan) Inflation Rate Ex-Food and Energy YoY	Low	JPY
01:00	(Belgium) Friday after Ascension Day	None	EUR
04:00	(New Zealand) Credit Card Spending YoY	Low	NZD
04:35	(Japan) 3-Month Bill Auction	Low	JPY
05:30	(Japan) Tertiary Industry Index MoM	Low	JPY
07:00	(Germany) PPI YoY	Low	EUR
07:00	(Germany) PPI MoM	Medium	EUR
08:00	(Slovakia) Current Account	Low	EUR
09:00	(Greece) Current Account	Low	EUR
09:00	(Italy) Construction Output YoY	Low	EUR
09:30	(Slovenia) PPI YoY	Low	EUR
10:00	(Slovakia) Unemployment Rate	Low	EUR
11:00	(Spain) Consumer Confidence	Medium	EUR
12:00	(Montenegro) Current Account	Low	EUR
13:30	(Canada) Retail Sales YoY	High	CAD
13:30	(Canada) Retail Sales Ex Autos MoM	High	CAD
13:30	(Canada) Retail Sales MoM	High	CAD
13:45	(United States) Fed Williams Speech	Medium	USD
14:00	(United States) Fed Bowman Speech	Medium	USD
15:55	(Euro Area) ECB Schnabel Speech	Medium	EUR
16:00	(United States) Fed Chair Powell Speech	High	USD
18:00	(United States) Baker Hughes Oil Rig Count	Low	USD
18:00	(United States) Baker Hughes Total Rig Count	Low	USD
20:00	(Euro Area) ECB President Lagarde Speech	Medium	EUR

Today's Scenario: - The USD/JPY pair has experienced a strong rebound, reaching approximately 138.68, following the release of higher-than-expected inflation figures by the Statistics Bureau of Japan for the month of April. The national headline Consumer Price Index (CPI) surged to 3.5%, surpassing the previous reading of 3.2%, while market expectations were for a slowdown to 2.5%. The Core CPI, which excludes food and energy prices, accelerated to 4.1%, exceeding the consensus of 3.4% and the previous release of 3.8%.

Despite the increase in inflation in Japan, the Bank of Japan (BoJ) is likely to maintain its ultra-accommodative monetary policy in order to sustain inflation above 2% for an extended period.

Earlier this week, Japan's Gross Domestic Product (GDP) displayed positive growth in the first quarter. The preliminary Q1 GDP expanded by 0.4%, surpassing estimates of 0.1%. In the previous quarter, GDP growth had remained stagnant. Japan's Economy Minister, Shigeyuki Goto, highlighted that the economy is expected to continue its moderate recovery, driven by improving sentiment, wage hikes, and strong corporate investment appetite.

Buy Scenario: - On the upside, if the USD/JPY pair resumes its upward momentum, it could target the recent peak at 138.75. A breakthrough above this level could propel the pair towards revisiting the yearly high near 139.00.

However, the pair may face challenges from the late November 2022 peak near 139.90 and the psychological level of 140.00, which could impede further gains for USD/JPY buyers. Till we did not advise to buy in USD/JPY.

Sell Scenario: - The recent retreat in the USD/JPY pair can be attributed to the overbought RSI (14) line and cautious sentiment ahead of Federal Reserve (Fed) Chairman Jerome Powell's speech and negotiations surrounding the US debt ceiling. However, bullish signals from the MACD indicator are keeping the pair relatively strong, maintaining levels not seen since November 2022.

Considering these factors, the USD/JPY pair remains in focus for bullish traders. However, a short-term pullback is limited by the presence of a four-day ascending trend line around 138.15 and a one-week rising support line near 137.15.

In the event of a quick decline, the pair could target the 200-day Simple Moving Average (SMA) level at 134.50. Till we did not advise to sell the position in USD/JPY.

Support and Resistance Level: -