Daily Analysis For USD/JPY 26-05-2023

Daily Analysis For USD/JPY 26-05-2023

USD/JPY Analysis
Key Points for USD/JPY pair
• USD/JPY has comfortably dropped below the 140.00 level as the US Dollar index undergoes an extended correction.
• The minutes from the Federal Open Market Committee (FOMC) meeting revealed that several policymakers at the Federal Reserve expressed uncertainty regarding the trajectory of future interest rates.
• The Bank of Japan (BoJ) has signaled its willingness to shorten the duration of bond yield targets, specifically targeting a 5-year zone instead of the current 10-year as part of its Yield Curve Control (YCC) policy.
• USD/JPY has experienced significant gains following a breakout from the Ascending Triangle pattern.
Today's Scenario: - During the Asian session, the USD/JPY pair has slipped below the important support level of 140.00. This decline can be attributed to the overall weakness seen in the US Dollar Index (DXY). The DXY has been experiencing a correction and currently hovers around 104.11 after failing to maintain its recent two-month high of 104.31. Interestingly, the correction in the USD/JPY pair appears to be more significant compared to the correction in the USD index, indicating that the Japanese Yen has also strengthened.
In the Asian session, S&P500 futures have continued to decline, reflecting an extension of the risk-averse sentiment. Although US equities experienced substantial buying on Thursday, driven by a strong recovery in technology and financial stocks, investors are becoming increasingly concerned as negotiations between White House officials and Republican leaders seem to be ongoing without resolution. This uncertainty is pushing the US economy closer to a potential default situation.
Fears of a US default are driving up US Treasury yields, with the yield on 10-year US government bonds surpassing 3.83%.
Looking ahead to Friday, the USD Index is expected to be in focus as the US Durable Goods Orders data for April is set to be released. The data is anticipated to show a contraction of 1.0% compared to the previous expansion of 3.2%.
Diagram of USD/JPY
USD/JPY
Economic Events: -
GMTEventImpactCurrency
00:30(Japan) Tokyo Core CPI YoYLowJPY
00:30(Japan) Tokyo CPI YoYLowJPY
00:30(Japan) Tokyo CPI Ex Food and Energy YoYLowJPY
02:30(Australia) Retail Sales MoMHighAUD
04:35(Japan) 3-Month Bill AuctionLowJPY
06:00(Japan) Leading Economic IndexLowJPY
06:00(Japan) Coincident IndexLowJPY
07:00(Lithuania) Retail Sales MoMLowEUR
07:00(Lithuania) Retail Sales YoYLowEUR
07:00(United Kingdom) Retail Sales ex Fuel MoMHighGBP
07:00(United Kingdom) Retail Sales ex Fuel YoYHighGBP
07:00(United Kingdom) Retail Sales YoYHighGBP
07:00(United Kingdom) Retail Sales MoMHighGBP
07:30(Switzerland) Non Farm PayrollsLowCHF
07:45(France) Consumer ConfidenceMediumEUR
08:15(Euro Area) ECB Enria SpeechLowEUR
08:40(Euro Area) ECB Lane SpeechMediumEUR
09:00(Italy) Consumer ConfidenceMediumEUR
09:00(Italy) Business ConfidenceMediumEUR
09:00(Austria) Bank Austria Manufacturing PMIHighEUR
10:10(Italy) 6-Month BOT AuctionLowEUR
11:00(France) Jobseekers TotalLowEUR
11:00(France) Unemployment Benefit ClaimsMediumEUR
11:00(Luxembourg) Balance of TradeLowEUR
13:30(Canada) Wholesale Sales MoMLowCAD
13:30(United States) Goods Trade BalanceHighUSD
13:30(United States) Wholesale Inventories MoMMediumUSD
13:30(United States) Core PCE Price Index MoMHighUSD
13:30(United States) Core PCE Price Index YoYLowUSD
13:30(United States) PCE Price Index MoMMediumUSD
13:30(United States) PCE Price Index YoYMediumUSD
13:30(United States) Personal Spending MoMHighUSD
13:30(United States) Personal Income MoMHighUSD
13:30(United States) Retail Inventories Ex Autos MoMMediumUSD
13:30(United States) Durable Goods Orders Ex Transp MoMHighUSD
13:30(United States) Non Defense Goods Orders Ex AirLowUSD
13:30(United States) Durable Goods Orders MoMHighUSD
13:30(United States) Durable Goods Orders ex Defense MoMHighUSD
15:00(United States) Michigan Consumer ExpectationsLowUSD
15:00(United States) Michigan Current ConditionsLowUSD
15:00(United States) Michigan 5 Year Inflation ExpectationsLowUSD
15:00(United States) Michigan Consumer SentimentHighUSD
15:00(United States) Michigan Inflation ExpectationsLowUSD
16:00(Canada) Budget BalanceLowCAD
18:00(United States) Baker Hughes Oil Rig CountLowUSD
18:00(United States) Baker Hughes Total Rig CountLowUSD
Buy Scenario: - The USD/JPY pair has experienced substantial gains following a breakout of the Ascending Triangle pattern that was formed on the daily chart. The price action is currently showing strong upward momentum as it approaches the horizontal resistance level, which is drawn from the high reached on November 11, 2022, at 142.25.
Furthermore, the Relative Strength Index (RSI) (14) is oscillating within the bullish range of 60.00-80.00, indicating that the upside momentum remains active. Till we did not advise to buy in USD/JPY.
Sell Scenario: - Although there has been a recent pullback, the USD/JPY pair is still supported by a two-week ascending trendline and a resistance-turned-support line that originated in mid-December 2022. These support levels are located around 139.55 and 137.70, respectively. As a result, they are acting as barriers to limit the downward movement of the USD/JPY pair in the short term. Till we did not advise to sell the position in USD/JPY.
Support and Resistance Level: -
SupportResistance
S1 139.18-R1 140.59
S2 138.30-R2 141.12
S3 137.77-R3 142.00

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