USDJPY Continues to Decline as BOJ Begins to Notice JPY Weakness【June 5, 2024】

June 05, 2024

Markets Analysis

Fundamental Analysis

  • USDJPY continues to decline significantly as the BOJ Vice Governor comments on the impact of JPY weakness.
  • Reports suggest that the BOJ is considering reducing its long-term bond purchases, causing USDJPY to temporarily drop to the 154 JPY range.
  • With U.S. job openings at a low level, interest rate cut expectations are rising, but stock prices are only showing modest gains.

USDJPY technical analysis

Analyzing the daily chart of USDJPY, it has declined for two consecutive days, temporarily dropping to the 154 JPY range. The decline in U.S. long-term interest rates follows low U.S. job openings. Additionally, the BOJ Vice Governor commented on the impact of JPY weakness. Recently, the BOJ has shown attention to the impact of JPY weakness, and there are speculations of additional rate hikes in July.

USDJPY is trading below the 52-day moving average, making the downtrend clear. It is also trading within the Ichimoku cloud, indicating potential instability. The key point to watch is whether it will break below the upward trendline. If it breaks below the upward trendline, the downtrend may gain momentum.


Day trading strategy (1 hour)

Analyzing the 1-hour chart of USDJPY, it is being sold off to the mid-154 JPY range. This decline is influenced by different factors compared to previous declines, including the drop in U.S. long-term interest rates, muted response in the U.S. stock market to rising interest rate cut expectations, BOJ’s interest rate cut expectations, and reports of reduced long-term bond purchases. There is a possibility of a strong corrective decline or a trend reversal, so caution is needed when buying on dips.

Key events to watch today are the U.S. ADP employment report and the U.S. government employment report on Friday. Additionally, the Bank of Canada will announce its policy interest rate today, with attention on whether a rate cut will be implemented. The ECB is also expected to cut rates, marking a shift from the rate hike policies that have been in place since 2021.

Japan, on the other hand, is on the verge of starting rate hikes, potentially reversing the JPY weakness into JPY strength.

The day trading strategy is to consider selling at the rebound high. Selling around 155.85 JPY, setting a stop at 156 JPY, and taking profit at 154.25 JPY.

Support/Resistance lines

The support and resistance levels to consider moving forward are as follows:

  • 155.70 JPY – Monthly Pivot

Market Sentiment

USDJPY: Sell: 31% Buy: 69%

Featured Currency Pair of the Week (NZDCAD)

Focus on the Bank of Canada’s interest rate cut. Although the rate cut is already priced in, it is still expected to exert upward pressure. Currently trading around 0.845 CAD, there is a possibility of a momentary rise to 0.85 CAD.

However, as the saying goes, “buy the rumor, sell the fact,” there may be a strong trend of profit-taking. It will be interesting to see if it becomes the second major rate cut after Switzerland among major countries.

Today’s important economic indicators

Economic indicators and eventsJapan time
Nikkei Services PMI9:30
Australia GDP10:30
U.S. ADP Employment Report (Forecast: +175,000)21:15
Canada Policy Interest Rate Announcement (Forecast: 4.75%)22:45
U.S. ISM Non-Manufacturing Index23:00
U.S. Crude Oil Inventory23:00
Bank of Canada Press Conference23:30

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

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