Rate Hike Expectations Heat Up! USD/JPY Targets 161

Summary:

Until the Bank of Japan takes any concrete action or the current trend structure is broken, the upside remains the path of least resistance.

BUY USDJPY

Close Time

CLOSED

160.203

Entry Price

163.000

157.500

162.376 +0.018 +0.01%

61.6

Pips

Profit

157.500

160.819

Exit Price

160.203

Entry Price

163.000

Fundamentals

Although rising energy prices have increased downside risks to the economy, the market still believes that the Japanese economy possesses a certain degree of resilience in the short term. If tensions in the Middle East persist and lead to a prolonged closure of the Strait of Hormuz, Japan’s economic growth in the third quarter could stall or even contract. However, given the government’s fiscal support measures and the performance of subsequent economic data, the Japanese economy is still expected to maintain moderate growth. Against this backdrop, the Bank of Japan is expected to continue its process of monetary policy normalization. The market widely believes that as long as the conflict in the Middle East does not escalate further and trigger severe financial market turmoil, the Bank of Japan will maintain its stance of gradual interest rate hikes. Currently, persistent inflation above the target level is viewed as a greater risk than a short-term economic slowdown.

The market is currently closely watching the upcoming U.S. Consumer Price Index (CPI) data. It is widely expected that the month-over-month increase in the core CPI for May will slow to 0.3% from 0.4% in April, but the year-over-year increase may rise from 2.8% to 2.9%. In the bond market, the yield on the two-year U.S. Treasury note—the bond most sensitive to monetary policy—fell to 4.145%, while the benchmark 10-year U.S. Treasury yield rose to 4.54%, pushing the yield curve to steepen further. Meanwhile, the U.S. Treasury is set to issue a total of $119 billion in new Treasury bonds this week, further testing market demand for long-term bonds.

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 62, 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 59, indicating an optimistic market sentiment. The recommended strategy is to buy on dips.

Rate Hike Expectations Heat Up! USD/JPY Targets 161_1

Rate Hike Expectations Heat Up! USD/JPY Targets 161_2

Trading Recommendation

Trading Direction: Buy

Entry Price: 160

Target Price: 163

Stop-Loss Price: 157.5

Support Levels: 158, 157, 155

Resistance Levels: 161, 162, 163

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Rate Hike Expectations Heat Up! USD/JPY Targets 161

Risk Disclosure