USDJPY may try to leave the current range

The USDJPY currency pair finished the third week in a row, trading in a sideways range between 138.8 and 140.5. The dollar rolled back from local highs against most currencies but not the yen. The fundamental weakness of the Japanese currency leaves room for another USDJPY growth momentum to 141. There is also a possibility for a downward exit from the current price range, but there are few chances for this outcome. 

The publication of the U.S. inflation data for May will be the main event of today. Market participants expect the overall price growth rate to decrease from 4.9% to 4.2%. However, the core inflation indicator, which is closely watched by Fed officials, may increase from 5.5% to 5.6%. The forex traders will neutrally perceive the release of statistics in line with the forecast. 

This data will be the last the Fed will get before tomorrow's monetary policy meeting. The market consensus is in favor of keeping interest rates unchanged, and even if May inflation deviates from forecasts a little, Jerome Powell and his colleagues are unlikely to change their position. At the same time, the current forecast for the July meeting suggests a 0.25% rate hike, and in this case, a change in expectations may seriously affect the dollar.

The Bank of Japan will decide on its monetary policy on Friday, but there are very few surprises here. After maintaining a negative key rate for over seven years, Japanese regulators are cautiously talking about possible changes. The monetary policy tightening, most likely, won’t be discussed until fall, and it will continue to put pressure on the yen.

The tactics of buying USDJPY around 138.8 and selling above 140 are still relevant. An exit from the current flat will be fixed only after a breakdown of 141 or a decrease under 138.2.

We may offer you the following option of trading strategy: 

Buy USDJPY near 138.8. Take profit — 140. Stop loss — 138.2. 

Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.