Inflation Out of Control! USD/JPY to Break Above 161

Summary:

Japan's finance minister has issued a verbal warning, stating that the government is closely monitoring speculative activity and stands ready to take decisive action to prevent the yen from weakening.

BUY USDJPY

EXP

TRADING

160.518

Entry Price

163.000

158.000

160.533 -0.017 -0.01%

0.0

Pips

Flat

158.000

Exit Price

160.518

Entry Price

163.000

Fundamentals

Driven by soaring energy prices resulting from the escalating conflict in the Middle East and the de facto closure of the Strait of Hormuz, major global economies are facing a new wave of imported inflationary pressures, leading to significant shifts in inflation trends and monetary policy expectations in Japan and the United States. In Japan, wholesale inflation accelerated in May to its fastest pace in three years. Data released by the Bank of Japan showed that the Producer Price Index (PPI) rose 6.3% year-on-year in May, exceeding market expectations of 5.5% and the revised April figure of 5.3%, marking the largest increase since March 2023.

The resilience of the U.S. labor market is also prompting the Federal Reserve to remain cautious. Previously released data showed that job growth in May exceeded expectations for the third consecutive month, while the unemployment rate remained at 4.3% for the third straight month. Although financial markets have begun to price in the possibility of further rate hikes in the future, the bar for the Federal Reserve to raise interest rates remains high overall. The market widely expects the Federal Reserve to keep the benchmark overnight interest rate unchanged at the 3.50% to 3.75% range at its meeting next week.

Technical Analysis

On the daily chart, the USD/JPY pair shows an upward-sloping Bollinger Band and diverging moving averages, indicating an overall upward trend. There is a high probability that the price will rise to near the previous high of 160.8. The RSI stands at 65, suggesting that market sentiment is predominantly bullish. On the 4-hour chart, the Bollinger Band is widening upward, moving averages are diverging upward, and the MACD fast and slow lines are trading above the 0 line, indicating that the bullish trend remains intact. The RSI stands at 67, indicating that the market is in an optimistic mood. Strategically, look to buy on dips.

Inflation Out of Control! USD/JPY to Break Above 161_1

Inflation Out of Control! USD/JPY to Break Above 161_2

Trading Recommendation

Trading Direction: Buy

Entry Price: 160.5

Target Price: 163

Stop-Loss Price: 158

Support Levels: 158, 157, 155

Resistance Levels: 161, 162, 163

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Inflation Out of Control! USD/JPY to Break Above 161

Risk Disclosure