Fundamental Analysis

• Bank of Japan hints at monetary tightening, but temporary USDJPY drop proves ineffective
• Stagflation concerns in the US, inflation and recession progressing simultaneously
• Some US financial authorities indicate that rate cuts within the year are unlikely

USDJPY technical analysis

Analyzing the daily chart of USDJPY, after rebounding from the 52-day moving average, it rose to 155.87JPY, targeting pre-intervention highs and shifting back to a weaker JPY and stronger USD trend. The 156JPY level corresponds to half the decline caused by the intervention; surpassing this could bring the 160JPY range into view. The ADX suggests a strong trend, and the MACD also indicates a rise.

Despite the Bank of Japan’s hint at monetary tightening, the effect was limited as no actual policy was implemented. With buy-the-dips dominating, the lower side has become more solidified.

This week will see successive speeches from US Federal Reserve officials. In the US, ‘stagflation’—simultaneous inflation and recession—is becoming evident. If stagflation prevails, it poses a significant challenge. High interest rates can curb inflation but worsen the economy significantly. Cutting rates might not reduce inflation. The US economy was hoped to achieve a soft landing, but clouds are gathering.

Day trading strategy (1 hour)

Analyzing the 1-hour chart of USDJPY, the currency pair continues its uptrend, with a low around 151.80JPY. As the interest rate differential between Japan and the US remains unchanged, even if the USD weakens, the tendency towards a weaker JPY and stronger USD continues.

Resistance lines at 156JPY and 156.24JPY mark recent thresholds. While it may rise to 156.24JPY, an adjustment could occur. If it surpasses 156.24JPY, the 61.8% level at 157JPY comes into view.

Day trading policy is to buy on dips. Enter at around 155.80JPY and set the take-profit line at 156.24JPY. The stop loss is placed at 155.65JPY.

Support/Resistance lines

Key support and resistance lines to consider are as follows:

156.00JPY – 50% Fibonacci retracement

Market Sentiment

USDJPY Sell: 76%, Buy: 24%

Featured Currency Pair of the Week (AUDNZD)

Analyzing the daily chart of AUD/NZD, an uptrend is occurring, but a clear divergence on the MACD suggests a change in trend, though it is not a sell signal yet. The appearance of a bearish engulfing candlestick at high levels indicates a potential drop.

Long-term, it remains in an uptrend, but an adjustment seems likely soon. The support line is around 1.09NZD, and the 28-day moving average may act as a support.

Today’s important economic indicators

*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.