Sat, June 15, 2024

USD/JPY Below 157.00 Amid Key Economic Data Events

The Japanese Yen, U.S. dollar and other currencies. USD/JPY

Quick Look:

  • USD/JPY trading below 157.00 during Tuesday’s Pacific session, with a focus on central bank rates and key economic data.
  • Japanese Tokyo CPI (Friday), US GDP (Thursday), US PCE inflation (Friday), US Consumer Confidence Index (Tuesday).
  • Subdued market opening due to US Memorial Day; anticipation of Fed speeches; BoJ’s limited success in strengthening Yen.

The USD/JPY pair has been observed trading below the 157.00 mark. This activity occurs during Tuesday’s Pacific market session, where investor focus remains sharply directed towards central bank rate decisions and pivotal economic data releases.

Several critical data announcements could significantly influence the USD/JPY dynamics this week. US GDP growth seems to be decreasing from 1.6% in the previous quarter to 1.4% for Q1, with the announcement on Thursday. US PCE inflation will hold steady at a monthly increase of 0.3%. The analysts are planning to release the data on Friday. According to the forecasts, the US Consumer Confidence Index will be declining from 97.0 to 95.9, with this an upcoming metric released on Tuesday.

Tokyo CPI Predicted to Rise to 1.9% from 1.6%

Recent economic indicators reflect notable changes in both the Japanese and US economies. The Japanese Corporate Services Price Index increased to 2.8% year-on-year from 2.3%. Japanese Tokyo CPI inflation will rise to 1.9% year-on-year from 1.6%. The US PCE Price Index will maintain a steady growth rate of 0.3% month-on-month.

The opening of the trading week has been relatively subdued, attributed to the US Memorial Day holiday. Market participants are also keenly awaiting several speeches from key Federal Reserve officials. Conversely, the Bank of Japan (BoJ) continues to exhibit limited success in bolstering the Yen’s strength.

USD/JPY Above 200-Day EMA, Eyes 158.00 Resistance

Currently positioned below the 157.00 handle, the USD/JPY pair has recovered more than half of its losses from the peak of 160.32. Notably, the pair has been trading above the 200-day EMA, set at 149.13, since January, showing a robust uptrend of over 11% in 2024. Analysts are now focusing on the BoJ’s policy stance, US consumer confidence data, and the potential for the USD/JPY pair to move towards 158. Key technical levels include resistance at 160.209 (the high from April 29) and support at 151.685. A potential drop below 156 could bring the 50-day EMA into play.

BoJ Governor Kazuo Ueda has reiterated a cautious approach towards achieving the 2% inflation target, noting the need to consider the timing of interest rate hikes carefully.

Yen Weakness May Lead to Higher Import Costs in Japan

A weaker Yen could lead to higher import costs, potentially affecting household spending in Japan. The BoJ will likely maintain its current stance if household spending remains weak. However, any movement of the USD/JPY pair beyond 158 could heighten the risks of market intervention. In the short term, the trajectory of the USD/JPY will hinge on inflation data from Japan and the US.

Upcoming US economic events include consumer confidence data, which, if it declines, could indicate weakening consumer spending. There are also notable addresses from Fed officials Mester, Kashkari, and Cook anticipated and data from the housing and manufacturing sectors, which are expected to provide further insights into the economic outlook.

Technical Indicators

The 14-day Relative Strength Index (RSI) is currently at 60.60, suggesting the potential for the USD/JPY pair to advance towards the 160.209 resistance level. The USD/JPY pair remains under significant scrutiny as market participants assess the implications of upcoming economic data and central bank policies. The interplay of these factors will be crucial in determining the near-term direction of the currency pair.

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