The Japanese Yen (JPY) slipped against the British Pound (GBP) on Thursday, reacting to the US Federal Reserve's recent hawkish hold, which bolstered the GBP/JPY pair. As the week progresses, investor focus shifts to the impending Bank of Japan (BoJ) policy decision scheduled for Friday. While the BoJ is widely expected to keep interest rates unchanged, market participants remain cautious, speculating on possible reductions in the central bank's bond purchases.

In a press conference following the Federal Reserve's decision, Chair Jerome Powell highlighted that the Fed's restrictive monetary policy stance is having the intended effect on inflation. The US Consumer Price Index (CPI) increased by 3.3% year-over-year in May, slightly below the previous reading and market expectations of 3.4%. The core CPI, which excludes volatile food and energy prices, rose by 3.4% in May, down from April’s 3.6% and marginally below the forecasted 3.5%.

Meanwhile, Japan's Producer Price Index (PPI) data revealed a 2.4% year-over-year increase in May, surpassing market expectations of a 2.0% rise. This jump in producer prices has raised concerns about potential higher consumer inflation in Japan.

Japan's Finance Minister Shunichi Suzuki emphasized the importance of continuing efforts to achieve economic growth and maintain fiscal health to retain confidence in the country's fiscal policy. His comments come as nearly two-thirds of economists in a Reuters poll anticipate that the BoJ will begin tapering its monthly bond purchases at Friday's policy meeting—a significant initial step toward gradually reducing the central bank's extensive balance sheet.

Takeshi Minami, Chief Economist at Norinchukin Research Institute, commented, "There is no longer any reason to continue large-scale purchases of government bonds since it has been judged that a 2% rise in prices is within reach." This sentiment echoes a broader market expectation for the BoJ to adjust its monetary policy stance in light of rising inflation expectations.

BoJ Governor Kazuo Ueda, speaking to parliament last week, noted that while inflation expectations are gradually increasing, they have yet to reach the 2% target. Ueda stated, "We have been scrutinizing market developments since the March decision. As we proceed to exit our massive monetary stimulus, it's appropriate to reduce bond purchases."

The GBP/JPY pair has maintained its bullish trajectory, consistently closing above the 198.50 support line. This upward movement has led to the formation of new bullish waves, approaching the first target at 201.35. Positive momentum is expected to be fueled by stochastic indicators, potentially surpassing the 201.35 level and paving the way toward the next main station at 202.350.

The 14-period Relative Strength Index (RSI) has shifted into the 40.00-60.00 range, suggesting that while the bullish momentum is still in play, it is losing some strength. This consolidation phase could provide a foundation for further gains if positive momentum resumes.

In the event of a sustained move above 201.35, the GBP/JPY pair could aim for the next significant resistance level at 202.50. However, if the pair fails to break above 201.35, it may temporarily enter a correctional bearish phase, targeting the support level at 199.55 before any renewed bullish activity.

The expected trading range for GBP/JPY is between 200.60 and 201.90, with a bullish trend forecast.

Investors faced a double whammy on Wednesday. US stocks initially rose in early trading due to weaker-than-expected consumer price inflation data, followed by some volatility after the Fed announced its monetary policy. Despite this, most stocks still closed higher.

Meanwhile, the Dow Jones Industrial Average (DJIA) initially rose but then fell, closing down 35.21 points at 38,712, a 0.1% decline.

The Fed's decision to keep interest rates unchanged and significantly lower expectations for rate cuts this year was a direct factor causing substantial market volatility.

The Consumer Price Index (CPI) for May was flat month-on-month and rose 3.3% year-on-year, lower than April's 0.3% monthly increase and 3.4% yearly increase. Both figures exceeded market expectations. Excluding volatile food and gasoline costs, core CPI rose 0.2% month-on-month and 3.4% year-on-year in May, lower than April's data but still above economists' expectations.

In its policy statement, the Fed noted that recent inflation had made "modest" progress. Therefore, Fed Chairman Jerome Powell stated that the Fed "welcomes" the CPI data released on Wednesday while noting that the Fed needs to see similar future data to be confident in inflation progress.

As the market reacts to the lower-than-expected inflation data, the DJIA is set to open with a bullish trend. However, the index remained in a downward trend around the FOMC meeting and closed below the 100-day SMA, indicating that the correction will continue until bearish momentum is fully released.

Based on the current trend in stock index futures, the 4-hour chart still shows a death cross pattern, with limited strength in rebounding momentum. Investors may consider entering on rebounds, using yesterday's closing price as a reference point.

Trading Direction: Short

Entry Price: 38700, 38760, 38842

Target Price: 37845

Stop Loss: 39200

Valid Until: 2024-06 - 27 23:55:00

Support: 38561, 38445, 38348

Resistance: 38715, 38760, 38842

Due to persistent U.S. inflation and a tight job market, the Fed has repeatedly postponed expectations of rate cuts. Meanwhile, the Bank of Japan (BoJ) lacks confidence in achieving its 2% inflation target sustainably and continues to maintain a dovish stance. This has resulted in a significant interest rate differential between the U.S. and Japan, driving the yen's persistent weakness.

As the USD/JPY exchange rate approaches levels that might concern Japanese authorities, market expectations have increased for the BoJ to start reducing its monthly bond purchases. If the central bank announces a shift towards quantitative tightening at this week's rate meeting, the yen is expected to get a brief respite and then appreciate. Additionally, the BoJ is unlikely to sit idly by as the yen depreciates further; it is expected to adopt at least a somewhat hawkish stance.

In the 4-hour chart, USD/JPY has encountered multiple interventions and rapid declines over the past month, but each time it quickly stabilized and rebounded, suggesting each dip has been a better buying opportunity. At the current high levels, the risk of intervention by Japanese authorities increases, and the BoJ's actions are worth noting. If USD/JPY fails to advance further around 157.4, a downward adjustment may be imminent. Breaking the trend line could open up more downside potential.

In terms of trading strategy, a short-term short position could be attempted with small stop-losses for a high risk-reward ratio. It is recommended to short USD/JPY near 157.4, with a short-term target at 155.2 and a stop loss around 158.0.

Trading Direction: Short

Entry Price: 157.5

Target Price: 155.2

Stop Loss: 158.1

Support: 155.2/154.6

Resistance: 157.4/158.0

During the Asian session on Thursday (June 13), USDJPY fluctuated in a narrow range and is currently trading around 157.2.

The US May CPI released yesterday cooled more than expected, but the Fed maintained a hawkish tone. The US dollar index and US Treasury yields dived after the release of CPI data, and USDJPY followed suit, falling as low as 155.7. After the FOMC release of the dot plot and Powell's speech, USDJPY gradually rose and recouped most of its losses, eventually closing lower with a long lower shadow. At the moment, Japan's possible rate hike may be a disruptive factor. In addition, the interest rate differential between the US and Japan is difficult to narrow in the short term, which is a real problem. However, considering that USDJPY is currently at a high level, it will mainly follow the trend of the US dollar index, and it may be difficult to rise due to the interest rate spread. Regarding the US dollar index, I believe that the non-farm payrolls are unreliable. In the face of declining inflation, perhaps the dollar's decline has just begun. Indicators such as the core PCE price index, job openings, and wage growth hit three-year lows, and the US economy is on a downward trajectory from an economic, inflation, and employment perspective. As is customary, the dollar index will hit new lows, and USDJPY will be peaking.

Investors today should keep an eye on US PPI data for May and initial jobless claims.

Trading at the 1-hour timeframe, the MACD line crosses above the signal line, with the golden cross widening near the 0 axis. The bullish and bearish piercing patterns are showing interactively. Also, both bullish and bearish momentum has been fully released. Next, USDJPY will maintain an oscillating in a narrow range. In the short term, there is still room for upside, but resistance will be stronger when getting close to the 158-160 area. At the same time, support is seen at 155.7 for the time being, and for further support, we can look at 154.5. The situation in the 4-hour chart is similar to that of the 1-hour chart, with emotions of the market fully vented. The pair is expected to fluctuate in the 154.5-158.5 range in the short term. On the daily chart, USDJPY closed with a small bear candle yesterday. The MACD line crosses above the signal line, and the price is near the lower edge of the channel in the chart below. Overall, the uptrend is obvious, with support levels at 155.7 and 154.5, and resistance levels at 158.5 and 160.0. During the day, aggressive traders can buy low and sell high in the range of 155.7-158.5.

Trading Direction: Short

Entry Price: 158.0

Target Price: 155.7

Stop Loss: 158.8

Support: 155.7/154.5

Resistance: 158.5/160.0

During Thursday's (June 13th) Asian session, spot gold oscillated downward, and it is now trading at $2313.

U.S. May CPI was weaker than expected, so the USDX fell to 104.25 after the release of the data. In addition, 10Y U.S. bond yields fell 15bp. However, the FOMC policy meeting was unexpectedly hawkish, resulting in increases in the USDX and U.S. bond yields. At the same time, gold lost all the gains it earned at the beginning. Although the U.S. CPI inflation cooled, the Fed was not in a hurry to cut interest rates, and gold retraced a bit after rising. Moreover, after the data release, the market expectation for two interest rate cuts this year heated up. Then, gold followed the trend and rose to $2342. However, according to the Fed's dot plot in the early morning, the Fed's baseline scenario was only one rate cut, which suppressed the optimistic sentiment. Accordingly, gold prices depreciated, finally closing higher with a long upper shadow in the daily chart.

Regarding the inconsistency between CPI and FOMC, which one will gold follows? Now, the market is surprised about the combination of "CPI sharply weaker than expected and very hawkish FOMC meeting". After the CPI report, most of the Fed officials still agreed with one or less rate cut. On the one hand, the Fed may continue to play the role of ironing out market oscillation. On the other hand, the Fed has to maintain a strong USD for the November election, as well as for the soft landing of "strong employment and weak inflation". With the downward trend of inflation, interest rate cuts may only be a matter of time, but the high policy rate makes it difficult to strengthen the USD. On the contrary, given the current U.S. fiscal situation, a high policy rate will only play an erosion role. Thus, the long-term trend of the gold price has not changed, so we can start to buy gold at lows step by step.

Data: May CPI growth slowed to 3.3% YoY and 0% MoM. Besides, the core CPI growth rate hit a three-year low of 3.4% YoY or 0.2% MoM.

Dot plot: Median projection for the number of 2024 interest rate cuts dropped from 3 to 1. Moreover, 4 Fed officials thought there would be no rate cuts, 7 agreed with 1 rate cut, and 8 considered 2 cuts. The median projection for 2025 adds one more 25bp cut and the long-term neutral interest rate also rises by 25bps.

Today's focus: U.S. PPI data for May and initial jobless claims.

Under two sets of data on Wednesday, gold showed two different directions. Gold surged to $2341 under the impact of the CPI and plunged after the Fed's interest rate decision, once touching $2315. Now, the market is trading these data and news, and a wash trading pattern just passed. Now we don't see a clear direction for going up or down. For the second half of the week, gold will not change much but stay oscillating in the range of $2287-$2342.

Gold extended the rebound and closed the daily chart higher yesterday. Again, it consolidated the bottom and was suppressed under the Bollinger middle band. Although it is unlikely to enter a strong trend, gold will not move up or down dramatically, which is a positive signal for investors to buy low and sell high. In the 1H chart, the MACD line crosses below the signal line and forms a death cross at the 0-axis. As the two lines are getting closer, the gold trend will be oscillating today. In the 4H chart, the MACD line crosses above the signal line and the golden cross gets narrow. A death cross may emerge and the bullish momentum is weak. Nevertheless, as the gold bulls dominate, we need to follow the situation in the 1H chart. Regarding the daily chart, the MACD line crosses below the signal line and forms a death cross at the 0-axis, showing a weak trend currently. After rising for 3 days, gold stopped the decline and formed a double-top pattern. Therefore, gold should turn stronger but with limited rising space above. We have to be clear that technical indicators are for reference in normal situations, and they will be invalid under extreme situations. Today, our trading range will be $2287-$2342, in which aggressive investors can buy low and sell high.

Trading direction: Long

Entry price: 2287

Target price: 2342

Stop loss: 2280

Support: 2300.000/2282.000

Resistance: 2325.000/2342.000

During Thursday's (June 13th) Asian session, WTI oscillated slightly, and it is now trading at 77.8.

Yesterday, oil prices continued to close higher, but with a long upper shadow. The EIA data showed an unexpected increase in oil stocks, which sent the oil price down. Before that, crude oil rose in response to any news, like when the EIA monthly report downgraded the oil demand growth, when Iraq and Kazakhstan promised to compensate for production cuts, and when the U.S. CPI data was released. Finally, crude oil prices surged to 79 and stayed in the 78.5-80 area with massive resistance. However, after the EIA data showed crude oil inventories unexpectedly increased by 3.73 million barrels, and gasoline stocks rose more than 2 million barrels, showing a sharp contrast against the falling stocks in the API data. It also showed the first increase in crude oil production in 4 months. Thus crude oil prices plunged and lost the daily gains.

Yesterday, we also emphasized that oil prices were running at the upper edge of the channel, and it was better not to go long. In contrast, we recommended investors to go short with a small position, which offered some profits. However, we should note that yesterday's performance was strong before the stocks data, and some of the bearish factors were ignored. It proves that the bullish sentiment is active and in stark contrast to last week's situation. Besides, it shows an unstable market with large oscillations. Therefore, we have to manage our accounts carefully.

News: Ministry of Energy of the Republic of Kazakhstan: Kazakhstan's oil production in May exceeded the OPEC+ quota of 45,000 barrels per day. It will be compensated in June and Kazakhstan will fully comply with the oil production quota. Iraq's Ministry of Oil: Iraq will fully comply with the May quota of 203,000 bpd. The compensation for previous overproduction from will be implemented. It will meet the production quota of 4 million bpd for June 2024 and subsequent months.

EIA Monthly Report: The EIA lowered 2024 oil demand growth forecast by 100,000 bpd to 960,000 bpd. Oil demand growth will reach 1 million bpd by 2025 given the economic downturn and deployment of clean energy technologies.

Stocks: EIA data showed commercial crude oil stocks excluding the Strategic Petroleum Reserve (SPR) increased by 3.730 million barrels, or 0.82%, to 460 million barrels. U.S. SPR stocks rose 339,000 barrels to 370.5 million barrels, an increase of 0.09%, the highest since the week of March 31, 2023. Moreover, stocks in Cushing rose 854,000 barrels, and the rise in gasoline reached 2.102 million barrels compared to the expected rise of 1.964 million barrels. Refined oil stocks increased by 3.197 million barrels against an expected increase of 2.532 million barrels.

Today's focus: U.S. initial jobless claims and PPI data.

Yesterday, crude oil was strong and overwhelming against some bearish factors. It surged to 79 after the CPI data but retraced all intraday gains due to the bearish stocks data, closing with a long upper shadow. Yesterday's inverted hammer candlestick and the previous day's doji star indicate that oil prices have peaked, and investors should stop from blindly going long now. 

Technically, crude oil started to retrace after falling from highs and entering the strong resistance area of 78.8-80. However, it did not run on either side but maintained oscillating at highs. In the 1H chart, the MACD line crosses below the signal line and the death cross widens. The bearish momentum is released, and there is some falling space below, implying a possible decline later. In the 4H chart, the MACD line crosses below the signal line and forms a death cross. With the release of bearish momentum, the gap between these two lines will widen. Therefore, we should stop chasing the rise but try to sell at highs.

In the daily chart, crude oil closed higher for the third day with a long upper shadow. In addition, with the rise on Monday, the bull candle with the long-lower-shadow on Tuesday, and the inverted hammer pattern on Wednesday, investors need to be alert to the possibility of peaking. Therefore, it is better to stop chasing the rising trend at present. Nevertheless, the MACD line crosses above the signal line and the golden cross widens below the 0-axis, which confirms the improvement of sentiment. So, we should not expect too much downward space below. As the crude oil rises, it enters the massive resistance area, making it riskier to chase the rise. But if a sharp retracement appears, it will be a good chance enter long positions, so we should buy low and sell high in the short term. Today, our trading range will be 76.5-79.0, in which investors can buy low and sell high.

Trading direction: Long

Entry price: 76.50

Target price: 79.00

Stop loss: 75.80

Support: 76.500/75.500

Resistance: 79.500/80.500