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Head and Shoulders Bottom Pattern Will Continue to Function
Central Bank
Forex
Summary:
The JPYUSD extended its gains for a second consecutive day. Rising inflation data in Japan provides the Bank of Japan (BOJ) with room to potentially resume interest rate hikes.
Buy
CLOSEDUSDJPY
End Time
146.193
Entry Price
151.600
TP
142.000
SL
144.016 -0.151 -0.10%
2110
Points
Loss
142.000
SL
144.083
CLOSING
146.193
Entry Price
151.600
TP
Fundamentals
The USDJPY retreated below 146.00 on Wednesday, reaching a low of 145.60, a daily decline exceeding 1%. Japan's April PPI rose 4% year-over-year, marking a record high for the eighth consecutive month, potentially paving the way for the BOJ to resume rate hikes, thereby supporting JPY appreciation.
Data released Wednesday indicated that Japan's April PPI increased by 4.0% year-over-year, slightly down from March's 4.3%, aligning with market expectations. Despite the slight deceleration, the index hit a record high of 126.3, continuing its streak of record highs for eight months, highlighting persistent cost pressures in the wholesale sector.
Although the comprehensive tariff measures announced by the U.S. in early April have not yet fully impacted the market, partly due to a 90-day pause, Japan's April import price index in JPY terms saw a significant 7.2% year-over-year decrease, compared to a 2.4% drop in March. This decline suggests that the JPY's appreciation during market volatility has, at least for now, helped Japanese importers mitigate some price shocks.
Despite potential stagnation in underlying inflation and medium- to long-term inflation expectations, BOJ Deputy Governor Shinichi Uchida stated on Tuesday that wage growth is projected to remain robust, driven by a "very tight" Japanese labor market.
He added that companies may continue to "pass on rising labor and transportation costs by raising prices."
Shinichi Uchida also emphasized that the BOJ will assess the economic impact of U.S. trade policies "without any preconceived ideas," acknowledging significant global uncertainty.
This aligns with the previous day's BOJ meeting minutes, which indicated that the "policy path could change at any time." (bullish for the yen)
Technical Analysis
The USDJPY declined for a second consecutive day. The intraday bias is neutral. However, further upside is expected as long as the 143.98 and 142.43 support levels hold, with the head and shoulders bottom pattern in the 4H timeframe still in play.
As previously mentioned, the fall from 158.86 has likely bottomed at 139.87. The target will be 151.60, the 61.8% retracement of 158.86 to 139.87, after the bulls break through 148.64.
Trading Recommendations
Trading Direction: Buy
Entry Price: 145.36, 144.00
Target Price: 151.60
Stop Loss: 142.00
Valid Until: May 29, 2025 23:55:00
Support: 145.36, 144.20, 142.43
Resistance: 148.66, 149.86, 150.75
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