- The contrast between the hawkish stance of the US Federal Reserve and the Bank of Japan, which has abandoned negative interest rates cautiously, provides strong momentum for the bulls' control over the direction of the USD/JPY currency pair.
- Amid narrow trading at the beginning of the week, it is stabilizing around the resistance level of 151.40, having reached strong gains last week, breaching the resistance level of 151.86.
- However, currency officials in Japan's statements about monitoring the forex market with promises of intervention in case of continued currency depreciation, which could harm the economy, halted the gains of the currency pair.
On another note, US stock indices began the short trading week lower on Monday, pausing temporarily after the strong gains made last week, which pushed Wall Street market indices to record levels. According to stock trading platforms, the Dow Jones index fell by 162 points, and both the S&P 500 and Nasdaq 100 lost 0.3%. Thus, consumer and industrial sectors were the most sluggish, while the energy sector outperformed.
In corporate news, Intel shares fell by 1.7% after reports that China had issued guidelines for gradually phasing out American microprocessors from Intel in government PCs and servers. Also, Microsoft's stock dropped by 1.4% due to concerns about the impact of the new guidelines on Windows operating systems. Also, United Airlines' stock declined by 3.4% following a Reuters report of increased scrutiny by the Federal Aviation Administration due to recent safety incidents. On the positive side, shares of chip industry companies like Micron Technology rose by 6.3%, and Nvidia's stock increased by 0.8%.
The yield on 10-year US Treasury bonds rose to 4.25%, as traders awaited more stimuli to assess the timing of US interest rate cuts by the Federal Reserve. It is scheduled for release on Friday, the Personal Consumption Expenditure (PCE) inflation, the preferred inflation gauge of the Federal Reserve. Also, investors will scrutinize comments from several officials, including Fed Chair Powell, for further evidence on the next steps of the US central bank.
Meanwhile, Federal Reserve Bank of Atlanta President Raphael Bostic said on Friday that he expects only one quarter-point rate cut instead of the two previously anticipated. Last week, the Federal Reserve left the door open for three rate cuts this year, despite the upward revision of inflation forecasts for 2025. Current betting on a June cut is around 67%, up from about 55% before the Federal Open Market Committee's March decision.
USD/JPY Technical analysis and Expectations Today:
According to the performance on the daily chart, the general trend of the US dollar against the Japanese yen “USD/JPY” is still bullish and may remain so as long as it is stable above the psychological resistance of 150.00. Thus, we expect the movement to continue in a narrow range with its upward tendency until the reaction to the announcement of the US inflation reading at the end of the day. This week, along with signals from monetary policy officials from the Central Bank of Japan and the US Federal Reserve, and Japan's comments about intervention in the Forex market. According to the performance on the daily chart, the move towards the resistance levels of 151.85, 152.20, and 153.00 will be important for the technical indicators to move towards strong saturation levels with purchase.
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