Despite the risk of currency intervention by Japanese officials, the outlook for USDJPY remains rather bullish, as the American dollar is expected to rise further.
Key factors to watch this week:
1. Japan’s political situation. Prime Minister Sanae Takaichi has recently announced the dissolution of parliament, with an early election scheduled for February 8. Her plans to substantially increase budget spending and cut taxes, including the food sales one, have raised market concerns, pushing yields on national bonds higher, while weighing on the yen.
2. Bank of Japan’s (BoJ) meeting. Interest rates are expected to stay at the same level of 0.75%. However, the central bank’s rhetoric will be of more importance to market players. If the regulator hints at spring hikes, JPY could get much-needed support.
3. US economic statistics. The Personal Consumption Expenditures (PCE) index—the Fed’s preferred inflation gauge—is due to be released on Thursday, January 22. If the figures prove to be stubbornly high, the dollar will be backed, potentially sending USDJPY toward new highs.
4. Trade tensions. The escalating US-EU standoff over Greenland is heating up the market, boosting the yen’s appeal as a safe haven and limiting the pair’s ascent.
Our baseline scenario suggests that USDJPY will consolidate between 157.00 and 159.50 by the end of the week, attempting to test 160.00 from time to time. This is especially true if data from the US confirms the country’s resilient economy.
The ultimate recommendation is to buy USDJPY. Lock in profits at 160.00. Place Stop Loss at 156.80.
Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow entering a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
