13 May 2024, USD/JPY
USDJPY:
The USD/JPY pair traded on a stronger note near 155.80 during Asian trading on Monday. The hawkish stance of the US Federal Reserve (Fed) has provided some support to the dollar in recent sessions. This week, investors will be watching the Consumer Price Index (CPI), Producer Price Index (PPI) and U.S. retail sales for fresh impetus. In addition, there will be speeches from Jefferson and Mester later on Monday.
Early Monday, the Bank of Japan (BoJ) cut its purchases of Japanese government bonds (JGBs) in the latest operation in the 5-10-year window to 425 billion yen from 475 billion yen in the previous operation. Ruling party heavyweight Katsunobu Kato said conditions are emerging in Japan for normalization of the central bank's monetary policy. However, the BOJ must monitor economic conditions and coordinate carefully with the government to determine when to raise rates.
Fed officials issued a cautious message last week. Financial markets estimated the probability of a June rate cut at 5%, down from 10% at the start of last week, and the probability of a September cut fell to 75%, down from nearly 90% at the start of last week. The University of Michigan's preliminary consumer sentiment index came in at 67.4 in May versus 77.2 in April, worse than the forecast of 76.0. In addition, the one-year inflation forecast rose to 3.5% and the five-year inflation forecast rose to 3.1%, the highest since November 2023. The large interest rate differential between Japan and the U.S. continues to undermine the Japanese Yen (JPY) and create a tailwind for the USD/JPY pair.
Trading recommendation: Trade predominantly with Buy orders from the current price level
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