USD/JPY Keeps the Weak Bullish Momentum Ahead of US Data

USD/JPY has been on a bullish trend, which has been getting weaker, although today's inflation report from the US might change the situation

Skerdian Meta•Wednesday, May 10, 2023•2 min read

USD/JPY has been bullish since the last week of March, after a retreat in the previous weeks of that month as the banking problems took center stage, sending the USD lower and the JPY higher as a safe haven. The price reversed from below 130 and has been climbing higher in waves, pushing close to 138 last week.

Although, the banking problems resurfaced in the US and this pair tumbled around 450 pips lower. But the situation calmed and the sentiment improved, sending the price higher again, toward the 50 SMA (yellow) on the H4 chart, which stopped the climb. This moving average has been acting as resistance, keeping buyers in check, as the uncertainty in global markets remains.

Yesterday the JPY experienced a slight increase in response to the hawkish comments made by the Bank of Japan (BoJ) Governor, Kazuo Ueda. These remarks had the effect of exerting downward pressure on the USD/JPY currency pair, helped by the 50 SMA as well.

During a parliamentary session, Ueda stated that Japan’s economy was showing signs of improvement and that inflation expectations remained high. He further mentioned that the central bank plans to discontinue its yield curve control policy and gradually reduce its balance sheet once there is a stronger likelihood of inflation consistently reaching its target of 2%.

Besides that, the potential for the US Dollar (USD) to rise appears restricted due to the FED’s less hawkish stance. Recently, the US central bank outlined a more cautious approach to raising interest rates, placing greater emphasis on data-driven decision-making. This suggests the possibility of a pause in the year-long cycle of rate hikes. Furthermore, market expectations have started factoring in the likelihood of rate cuts toward the end of this year. These factors may continue to impede USD/JPY’s upward movement, particularly in anticipation of the crucial US Consumer Price Index (CPI) report, which will be released later today.

USD/JPY Live Chart

USD/JPY

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.