Taking A Small Long USDJPY Position Ahead of Big News

USDJPY resumed the uptrend last week, however, it has barely crawled higher this week as we await the US CPI, the FED, and BOJ meetings. Not much is expected by both central banks in terms of action during this week’s meetings, but investors remain cautious in case they hint or signal a policy change for the upcoming policy meetings, so the price action in USD/JPY has been slow.

Japan May PPI Inflation Report

USD/JPY found strong support near the 50-day Simple Moving Average (SMA) early last week. This moving average has consistently acted as a significant indicators for buyers to enter the market and the repeated bounces from the 50-day SMA suggest that it is a durable dynamic support level. Last week saw a recovery off the 50-day SMA, followed by a substantial 200-pip rise on Friday which propelled the price above the 157 level, indicating strong buying momentum and reaffirming buyer control in the market.

USD/JPY Chart Daily – Stochastic is Becoming OverboughtChart USDJPY, D1, 2024.06.11 21:03 UTC, MetaQuotes Ltd., MetaTrader 5, Demo

The USD/JPY rate has been exhibiting bullish momentum, with recent price action indicating strong buyer control in the market, so there’s rumours in the market about the Bank of Japan (BoJ) signaling its intention to reduce monthly bond purchases at Friday’s meeting. The current bond purchases amount to approximately Yen 6 trillion in Japanese Government Bonds (JGBs), aimed at maintaining a low Yen rate.

If the BoJ indeed announces a reduction in bond purchases, signaling a shift towards monetary policy tightening, it could have significant implications for the FX market. Such a policy shift would likely lead to an appreciation of the Japanese yen against major currencies, including the US dollar, sending this forex pair tumbling lower, with the first target being the low below 152 after the BOJ intervention in May.

However, we have the US CPI inflation report today, followed by the FED policy meeting, before the Bank of Japan meeting on Friday. This morning we also head the PPI inflation from Japan, which was expected to show a strong jump to 2.0%.

Japan PPI Inflation Report For May

  • May Producer Price Index MoM +0.7% vs +0.4 expected
  • April Producer Price Index MoM was +0.3%
  • May Producer Price Index YoY +2.4% vs +2.0% expected
  • April Producer Price Index YoY was +0.9%

USD/JPY Live Chart

USD/JPY
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Skerdian Meta
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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.
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