21 June 2024, USD/JPY
Event to watch out for today:
16:45 GMT+3. USD - Composite PMI
USDJPY:
The Dollar-Yen pair is holding near the 159.00 mark in the Asian session on Friday after six trading sessions. The asset is expected to extend gains towards multi-year highs near 160.00 as investors expect that the Bank of Japan (BoJ) may further delay plans to reduce bond purchases after its July meeting.
At the last monetary policy meeting, BoJ Governor Kazuo Ueda said that policymakers decided to postpone plans to reduce bond purchases and further raise interest rates until the July meeting. Policymakers also signaled their concerns about inflation expectations due to the significant weakening of the Japanese yen, which has made Japanese exports competitive in the global market and raised the cost of imports. The effects of a weak Japanese yen could lead to high inflation in the economy.
However, the national consumer price index (CPI) data for May seems to tell a different story. The core CPI, which excludes food and energy prices, fell to 2.1% from the previous reading of 2.4%. The report showed that the national consumer price index excluding fresh food rose a slower 2.5% compared to expectations of 2.6%, but was higher than the previous reading of 2.2%.
Meanwhile, the US Dollar (USD) declined to 105.50 but remains broadly steady as investors expect the Federal Reserve (Fed) to lag behind other central banks in trying to move towards a policy normalization process. Fed policymakers have already signaled that there will only be one rate cut this year, to be announced in the final quarter. Contrary to the Fed's latest interest rate forecasts, financial markets expect that there will be two rate cuts, with the process of policy expansion beginning with the September meeting.
Trading recommendation: Trade predominantly with Buy orders from the current price level.
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