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USD/JPY Analysis Today 12/06: Central Bank Policies (chart)

By Published On: June 12, 20242.3 min readViews: 1560 Comments on USD/JPY Analysis Today 12/06: Central Bank Policies (chart)

  • As the most important trading session of the week begins, the USD/JPY currency pair has settled around the 157.33 resistance level at the time of writing, hovering at its highest levels in over a week despite higher-than-expected Japanese domestic inflation figures.
  • According to the economic calendar results, data showed that producer prices in Japan jumped 2.4% year-on-year in May 2024, accelerating from a revised 1.1% increase in April, and marking the highest reading since August of last year.
  • Also, the latest figure beat market expectations of a 2% rise, raising concerns that it could translate into higher consumer inflation.

Meanwhile, investors are looking forward to the Bank of Japan’s policy decision on Friday, with a focus on whether the Japanese central bank will reduce its monthly bond purchases. Furthermore, Bank of Japan Governor Kazuo Ueda reiterated last week that the central bank will gradually shrink its massive balance sheet, although the timing remains uncertain.

On the US dollar front, the Federal Reserve is expected to keep the target range for federal funds steady at 5.25%-5.50% for a seventh straight meeting in June 2024, amid firmer-than-expected inflation and a strong Labor market and economy. Attention will be focused on any signs of when policymakers plan to cut borrowing costs, although no firm commitment is expected.

The so-called dot plot is likely to show policymakers have trimmed their projected cuts this year to two or fewer, compared with three expected in December. Likewise, the US Fed is due to release new economic forecasts. In April, the annual personal consumption expenditures inflation rate held steady at 2.7%, with core inflation steady at 2.8%. The US economy grew by 1.3% year-on-year in the first quarter, the slowest growth since the contractions in the first half of 2022. However, non-farm payrolls exceeded expectations in four months of this year.

USD/JPY Technical analysis and Expectations Today

There is no change in our technical view of the performance of the USD/JPY price. Technically, the general trend is still bullish and may remain so as long as the divergence between the Bank of Japan’s policy and the US Federal Reserve’s, as well as economic performance, continues. Clearly, the bulls’ control over the performance of the USD/JPY will remain as it is until an expected Japanese intervention in the currency markets to stop the collapse of the yen exchange rate against the rest of the global currencies, especially against the US dollar. Currently, the closest resistance levels to the current general trend are 157.85 and 158.60 and the psychological resistance 160.00, respectively.

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