The U.S. dollar has risen slightly at the beginning of the week. U.S. weak inflation data released last week forced markets to revise their forecasts on the further Federal Reserve’s (Fed) monetary policy course.
Matt Simpson, senior market analyst at City Index, believes inflation remains high, with markets reacting to future relative changes in the absolute level of interest rates. If the rates are close to their peaks, this is another restraining factor for the dollar.
Meanwhile, the Federal Reserve and the European Central Bank might implement quantitative tightening as early as next week.
However, market pricing implies a pause in Fed rate hikes ahead of next year's cuts.
The dollar's fall last week started with yen buying as investors were winding down positions in emerging markets. The American currency (USD) dropped by 2.2%.
The yen's sharp rise has slowed due to traders' doubts on whether the Bank of Japan will change its yield curve control policy next week. This creates additional support for the Japanese currency.
Tomorrow at 4:30 GMT Japan Tertiary Industry Activity Index will be released. It reflects the change in the total value of services provided to businesses over the reporting time period in relative terms. The forecast confirmation at the 0.4% level might slightly reduce the Japanese currency in the short term.
In addition, U.S. Retail Sales data will be published tomorrow at 12:30 GMT. According to forecasts, the index should rise to 0.5% from the previous level of 0.3%. This may strengthen the U.S. dollar's position.
The USDJPY currency pair has broken out of the uptrend on the D1 timeframe.
In terms of wave analysis, the price is in the formation of the second ascending wave. Short-term fundamental data confirms the growth of the current wave. However, breaking through the ascending support indicates the new trend formation.
Signal:
The short-term outlook for USDJPY suggests selling near the level of 140.00.
The target is at the level of 135.65.
Part of the profit should be taken near 137.60.
The Stop-loss is set at 142.10.
Bearish trend has a short-term character, so the trade volume should not be more than 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
