The USDJPY currency pair has significantly pulled back from the annual high of 151.9 in recent days. On Tuesday, the prices were falling to 147, where the bulls finally increased activity and seized the initiative. Yesterday we saw a sharp rebound to the level of 149, and the price is still at that level. Both American and Japanese traders have a day off on Thursday, but tomorrow the recovery in USDJPY may continue.
The new wave of USDJPY growth was supported by yesterday's economic statistics. Weekly jobless claims fell sharply from 233,000 to 209,000, beating expectations of 225,000. But an even bigger impact was provided by data from the University of Michigan. According to the latest survey, the U.S. population's expected inflation rate for the next 12 months rose from 4.4% to 4.5%.
Quincy Crosby, chief strategist at LPL Financial, considers such statistics a bad sign for the Fed. The U.S. regulator has taken many measures over the past year and a half to curb rising prices. But now the Fed has to struggle with consumer sentiment, trying to reconfigure people's psychology towards expecting lower inflation. This will not be easy, as expectations of rising prices are preventing inflation from returning to the 2% target.
At the same time, prospects for tightening monetary policy in Japan remain uncertain. Worsening outlook for economic growth may hinder cancellation of a negative key rate. Yesterday, the Japanese government lowered the overall forecast for the country's economy for the first time since January. Expectations for the level of investment were worsened for the first time since December 2021. In such a situation, the Bank of Japan is unlikely to take decisive action at the next meetings. The time for a large-scale strengthening of the yen against the dollar is yet to come.
The nearest target for a rebound in USDJPY is the landmark level of 150, which is close to the highs of the current year. The bears need to pull the prices back to the level of 148 to cancel the growth scenario.
Consider the following trading strategy:
Buy USDJPY at the current price. Take profit – 150. Stop loss – 148.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion
This content is for informational purposes only and is not intended to be investing advice.
