USDJPY declined by 0.6% on Thursday after Bank of Japan board member Hajime Takata delivered some comments. He hinted at the need to abandon ultra-soft monetary policy. Takata said Japan is entering a phase of change, moving away from the long-term belief that wages and inflation will not rise. His comments reinforced market expectations about the possibility of the country's first interest rate hike since 2007 in the coming months.
At the same time, the currency pair found support as market participants are in anticipation of the release of the Federal Reserve's (Fed) key inflation indicator.
As noted by John Williams, president of the Federal Reserve Bank of New York, there is still some way to go before the inflation target of 2% is reached. However, he emphasized that depending on incoming data the possibility of lower interest rates this year is becoming more and more realistic.
According to LSEG's IRPR app, there is a 63% chance of a 25 basis point cut in interest rates in the U.S. in June.
The markets will pay special attention to the publication of the Consumer Expenditures Price Index today. This macroeconomic indicator is the Fed's preferred measure of inflation. These indicators may help determine the direction for future monetary policy in the U.S.
Japanese macroeconomic news will dominate over that of the U.S. as investors are preparing for a potential narrowing of the interest rate differential between Japan and the United States.
USDJPY quotes have broken out of the uptrend on the H4 time frame.
Bears Power indicator volumes (standard values) are increasing in the negative zone. This indicates a sell-side movement.
Signal:
Short-term prospects for USDJPY suggest selling.
The target is at the level of 146.40.
Part of the profit should be taken near the level of 148.80.
A stop-loss could be placed at the level of 151.90.
The bearish trend is short-term, so trade volume should not exceed 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
