Current trend

The USD/JPY pair is showing moderate growth, recovering from a faltering attempt to decline the day before. The instrument is testing 157.15 for a breakout, almost completely restoring positions after the "bearish" correction. The American currency fell sharply after the publication of May inflation data, as well as the results of a two-day meeting of the US Federal Reserve. The Core Consumer Price Index excluding Food and Energy slowed down year-on-year from 3.6% to 3.4%, and on a monthly basis from 0.3% to 0.2%, strengthening expectations regarding the possible start of an interest rate reduction program in September.

Meanwhile, the US Federal Reserve kept the interest rate at 5.50%, and the Chair of the regulator, Jerome Powell, once again warned markets against excessive expectations regarding the proposed easing of monetary policy. The official’s words were supported by the publication of new forecasts for the dynamics of the interest rate for the short and long term: at the end of 2024, the expected value was reduced to 5.13%, which turned out to be significantly higher than the March estimates at 4.60%. At the same time, markets are still counting on two full cuts in borrowing costs of 25 basis points to 5.00%.

In turn, the Bank of Japan meeting will take place on Friday: investors do not expect changes in the vector of the regulator’s monetary policy, so the interest rate is likely to remain at 0.10%. At 06:30 (GMT 2), April Industrial Production data will hit the market: the indicator is expected to decline by another 0.1%. In turn, statistics on the volume of orders for machinery and equipment in May reflected an increase of 4.2% in annual terms after –8.9% in the previous month. The Producer Price Index accelerated from 0.5% to 0.7% month-on-month on expectations of a slowdown to 0.4%, and the domestic price index for corporate goods increased from 1.1% to 2.4% year-on-year also surpassing preliminary estimates of 2.0% and locally supporting the position of the Japanese currency.

Support and resistance

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is almost constant, remaining rather spacious for the current level of activity in the market. MACD is growing preserving a weak buy signal (located above the signal line). Stochastic, having approached its highs, is also trying to reverse into a descending plane, indicating the risks of overbought US dollar in the ultra-short term.

Resistance levels: 157.50, 157.98, 158.43, 159.00.

Support levels: 157.00, 156.50, 156.00, 155.50.

Trading tips

Long positions can be opened after a breakout of 158.00 with the target of 158.43. Stop-loss — 157.00. Implementation time: 1-2 days.

A rebound from 157.50 as from resistance, followed by a breakdown of 157.00 may become a signal for opening of new short positions with the target at 156.00. Stop-loss — 157.50.