The USDJPY currency pair is quoted near the historical high as the US inflation data released on Wednesday supported the dollar. The consumer price index (CPI) rose 0.4% in March instead of the expected 0.3%, thereby weakening market hopes for imminent interest rate cuts by the Federal Reserve (Fed).
According to CME FedWatch tool, investors estimate the likelihood of the Fed’s monetary policy easing in June at only 18%, while before the inflation data release it was about 50%. Markets begin to postpone the start of rate cuts by the US financial regulator from June to September.
Today traders are awaiting the US producer price index (PPI) data and Fed statements to look for short-term trading opportunities.
Meanwhile, the yen fell below 153.20 per dollar, the lowest level since 1990. Japan's top currency diplomat Masato Kanda said on Thursday that the country is ready to respond adequately to sudden currency fluctuations, while not ruling out any support measures. This increases the likelihood of intervention by the Japanese authorities. The last time the government intervened was in 2022 when the yen dropped to 152 per dollar.
Last month, the Bank of Japan exited from negative rates for the first time in eight years. But despite a significant weakening of the national currency recently, the regulator has no plans for additional monetary policy tightening.
USDJPY quotes are forming an uptrend on the D1 timeframe.
The Relative Strength Index (RSI) (standard values) divergence on the H6 timeframe points to the possible change in the price direction towards the formation of a downtrend. The indicator is in the overbought zone.
Today's strong news background may bring the currency pair closer to the ascending channel's resistance, which will increase the probability of currency intervention in Japan.
Signal:
The short-term outlook for the USDJPY currency pair suggests selling.
The target is at the level of 150.25.
Part of the profit should be taken near the level of 151.75.
A stop-loss could be placed at the level of 155.00.
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.
