The USDJPY pair is developing a new bullish wave in July, starting from a rebound off the ascending trendline. Last month, a similar price movement reached the 148 level before dollar bulls took profits. After a brief pause, this level could again become a key target for market participants. USDJPY has stopped making new local lows, signaling that bulls are taking control.
Today's weaker-than-expected Japanese producer inflation data further dampens yen demand. June price growth slowed from 3.3% to 2.9%, marking the third consecutive monthly decline. Masato Koike, senior economist at Sompo Institute Plus, anticipates similar consumer inflation trends with a slight lag. Anyway, the Bank of Japan won't hike rates until US trade negotiations conclude.
Earlier, Reuters sources noted that American officials had demanded yen strengthening as a key trade deal condition. However, they now believe Washington won’t push for currency interventions. Ultimately, an excessively weak dollar could trigger renewed inflation, which is clearly not what Donald Trump and his allies want. Instead of a stronger yen, Japan may offer increased US investments and higher energy purchases.
Meanwhile, the Fed isn’t rushing to weaken the dollar through policy easing. Yesterday’s June 18 meeting minutes revealed only a few of the 19 voting officials actively pushed for rate cuts. There’s no sign Fed members will bow to Donald Trump’s demands for sharp borrowing cost reductions. This could fuel renewed dollar demand in FX markets.
With the Stochastic nearing overbought territory, USDJPY's rally may pause. This creates an opportunity to strategically add long positions, targeting a further rise toward 148.
Consider the following trading strategy:
Buy USDJPY near the level of 146. Take profit — 148. Stop loss — 144.5.
This content is for informational purposes only and is not intended to be investing advice.
