USD/JPY Pressured After BoJ Inaction & Ahead of US Inflation Update

  • USDJPY
    (${instrument.percentChange}%)

USD/JPY Analysis

Sticky inflation and strong labor data from the US, along with a more reserved stance recently by some Fed voters have tempered expectations around the policy path. Chances of the first cut delivered in March have come down to roughly 50/50 according to CME's FedWatch Tool, which also projects them lower by 125-150 basis points by the end of the year.[1]

Expectations for an end to the ultra-loose setting by the Bank of Japan have also moderated and policymakers stood pat on Tuesday, while slashing their inflation forecasts. However, the appeared confident of achieving price stability, which would eventually allow them to normalize policy.

The pair was volatile after the BoJ decision and fails to benefit, given that confident tone and the Fed repricing. As such there is risk for a breach of the EMA200 (145.80), but sustained weakness has a higher degree of difficulty and the falling daily Ichimoku cloud could provide support.

On the other hand, markets still anticipated multiple rate cuts by the Fed, while its US peer pledged to continue with monetary easing. Above the EMA200 bias is on the upside, although 152.20 may prove elusive, at least in the near term. Markets now turn to a slew of data form the US for the next leg of the move, including Friday PCE inflation update.

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Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 21 Apr 2024 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

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