USDJPY Forecast: Japanese Inflation vs US Inflation

Key Events This Week

US Flash Manufacturing and Services PMIs (Wednesday)
US Advance GDP (Thursday)
Tokyo CPI Figures (Friday)
US Core PCE (Friday)

As the market anticipates the next Bank of Japan (BOJ) meeting on Wednesday, monetary tightening policies are expected to be discussed in light of rising inflation rates. According to Japan’s Governor Ueda, the BOJ's decision on whether to raise rates or reduce bond purchases involves two distinct operations.

The primary driver behind the elevated inflation levels in Japan is not direct consumer demand, but rather the increased prices of imports along with stagnant wage and service levels. This scenario likely postpones any rate hike by the BOJ until October given the lack of sustainability behind their 2% inflation rate target

The upcoming Tokyo CPI figures will be crucial for the BOJ as they assess their projections for the next quarter and evaluate the potential date for a rate hike. Additionally, details regarding the bond taper plan, covering a period of approximately two years, will be released in the upcoming meeting on July 30-31. The BOJ is also closely monitoring the Fed's potential rate cut, as it could favor the Japanese Yen without the need for drastic interventions.

The market widely expects the Fed to cut rates by September, given the persistent cooling of inflation levels. The upcoming US Advance GDP and Core PCE figures will further clarify the timing of the rate cut, as an earlier rate cut could help mitigate potential recession risks.

From a Technical Perspective:

USDJPY Forecast: USDJPY – Daily Time Frame – Log Scale

Source: Tradingview

While the US Dollar index steadies above the 104 level, USDJPY is heading back towards July lows, retesting the 155 zone once again. This zone is crucial as it represents the mid-level of the projected yearly channel and the 0.272 Fibonacci retracement level of the yearly trend.

The current support level is pivotal for determining whether the USDJPY will see a reversal or continue dipping towards the lower border of the channel.

Momentum Perspective:

The oversold Relative Strength Index (RSI) suggests a potential reversal on the near horizon. The projected support and resistance levels are as follows:

Bullish Scenario

A reversal from the 155 zone could push USDJPY back up towards levels 159.50 and 160.50 consecutively. These levels align with the 0.618 retracement of the drop between the July high and low, and the upper border of the projected channel. Further penetration into the primary yearly channel could shift the trend sentiment back to bullish.

Bearish Scenario

A drop below the 155 level could lead USDJPY towards the 0.382 and 0.5 retracement levels of the primary trend, near 153.60 and 151.20 respectively.

--- Written by Razan Hilal, CMT

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.