U.S. and Japan economic policies support USDJPY

The USDJPY currency pair started Thursday's trading session with a decline. Nevertheless, the pair quotes remain near the one-month-high. Investors tempered their optimism about a possible cut in interest rates due to strong statements of the Federal Reserve System (FRS) representatives and strengthening economic indicators in the U.S.

U.S. retail sales increased more than expected in December, providing a reliable support for the economy earlier this year.

Raphael Bostic, the Atlanta Fed president, will speak at two events during the day. In Sunday's Financial Times, Bostic warned of a possible inflation fluctuation if the central bank is too hasty in cutting rates. He said a slowdown in the pace of consumer prices to the Fed's 2% target may not happen in the coming months.

According to CME's FedWatch, investor expectations for the Fed to cut rates in March fell to 53.8% from 63.1% on Tuesday.

Meanwhile, expectations of the Bank of Japan to maintain ultra-soft monetary policy next week, reduces the value of the yen.

Many policymakers want to spend a few more months to determine whether wage increases will lead to a sustained target of 2% inflation set by the Bank of Japan. Because of this, traders have now shifted expectations for a rate hike no earlier than March or April.

However, the Japanese regulator is in the process of moving away from negative interest rates. Four well-informed sources say it is beneficial for the central bank to wait until at least the April meeting.

Surveys and statements from business organizations point to the fact that wages in Japan may rise this spring. They may increase by more than last year's high of 3.58%.

USDJPY quotes are forming a new uptrend on the H4 timeframe.

From the point of view of wave analysis, the price is in the process of forming the third incoming wave. The breakthrough of the top of the first wave at the level of 146.00 has already taken place. The upward movement may intensify in the near term.

Signal:

The short-term outlook for USDJPY is to buy.

The target is at the level of 151.40.

Part of the profit should be fixed near the level of 149.70.

A Stop-loss should be placed at the level of 145.40.

The bullish trend has a short-term character, so the trade volume should not be more than 2% of your balance.