The USDJPY currency pair is consolidating after last week’s significant drop ahead of the release of new data from the world's largest economy. These indices will help determine the further monetary policy of the US Federal Reserve (Fed).
Investors expect the Fed to keep interest rates at current levels at its meeting next week. The main focus will be on the outlook for monetary policy easing. At its December meeting, the US central bank suggested three quarter-point rate cuts in 2024.
According to LSEG's IRPR app, traders see a 67% probability of a rate cut in June, down from the previous estimate of 72% earlier in the week. The likelihood of a rate cut in July is 83%.
Today investors will be monitoring the data on retail sales, producer price index (PPI) and applications for unemployment benefits in the States. These statistics will help market participants to assess the state of the US economy and the likelihood of the Fed's decision not to cut rates in June.
The yen's strengthening has slowed as the Bank of Japan is in no hurry to change its ultra-loose monetary policy. The regulator may consider exiting the negative interest rate policy next week, especially if Friday's preliminary survey on wage negotiations shows positive results. Ending negative rates, which has been in place since 2016, would be a significant decision for the BOJ and the country's first rate hike since 2007. Any signs of policy tightening would lead to a stronger yen.
USDJPY quotes are forming a new downtrend after the price exited the uptrend on the H4 timeframe.
In terms of wave analysis, the price is forming the second ascending wave. Divergence of Relative Strength Index (RSI) (standard values) shows a potential change in the price direction towards the formation of the third descending wave.
Signal:
The short-term outlook for the USDJPY currency pair suggests selling.
The target is at the level of 144.10.
Part of the profit should be taken near the level of 146.50.
A stop-loss could be placed at the level of 149.95.
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.
