- The USD/JPY pair rebounded to the 148.00 resistance level, as Bank of Japan Governor Kazuo Ueda gave a slightly more pessimistic assessment of the economy ahead of the central bank's policy meeting next week.
- Ueda told parliament that "the Japanese economy is recovering moderately, although some data is showing weakness." He added, there are different ways to raise short-term borrowing costs if the Bank of Japan decides to end negative interest rates, but he gave little indication that this would happen.
- Recently, speculation has been growing that the Bank of Japan may start raising interest rates this month due to rising wages, rising inflation and a strong economy.
- Also, the data released earlier this week showed that the country's economy returned to growth in the fourth quarter of 2023, avoiding a technical recession.
What is expected for the USD/JPY in the coming days?
The Japanese yen is expected to trade against the US dollar at 151.38 by the end of this quarter, according to global macroeconomic models and analyst expectations. Looking ahead, we expect it to trade at 153.67 in 12 months.
On the front of the future of Fed’s policy, RBC Capital Markets has revised its expectations for the US Federal Reserve, now expecting 75 basis points of US rate cuts in 2024, to be delivered quarterly. This change represents a departure from the previous expectation of 125 basis points of cuts, starting with the June meeting and implemented at every meeting.
In this regard, Blake Gwin, an economist at RBC, said: "We still have early June as our base case, but we now see a quarterly pace of cuts.". Added, "We believe that the Fed is still willing to cut by June/July, as faster-than-expected progress on inflation is likely to be enough for the Fed to at least start the process of cutting." Moreover, this decision comes after worrying details in the February US Consumer Price Index (CPI) report, with RBC pointing to continued inflationary pressures.
Also, The RBC adjustment reflects a shift toward a scenario resembling previous “adjustment” cycles, such as those observed in 1995, 1998, and 2019.
USD/JPY Technical analysis and Expectations Today:
Based on the performance on the daily chart the price of the USD/JPY pair is still trying to recover from the recent downward outlook. As mentioned before, this won't happen without returning to the psychological resistance level of 150.00. Based on the recent performance, a move towards the support level of 146.00 will confirm the continuation of the downward trend, while at the same time, it will push technical indicators towards oversold levels. Today, the USD/JPY pair will be influenced by the reaction to the announcement of US economic data, including the Producer Price Index, US retail sales figures, and the weekly jobless claims. Also, there are the signals from global central bank officials and the extent of investors' risk appetite.
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