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Does the CPI Deliver a Critical Blow, Triggering a Breakdown and Decline in USDJPY?
Economic
Political
Summary:
Shigeru Ishiba denies any resignation plans, but his declining approval ratings have sparked external concerns regarding his political trajectory. Leadership changes could significantly impact the outlook for fiscal and monetary policy.
Sell
CLOSEDUSDJPY
End Time
147.800
Entry Price
146.600
TP
148.600
SL
147.011 +0.084 +0.06%
785
Points
Profit
146.600
TP
147.015
CLOSING
147.800
Entry Price
148.600
SL
Fundamentals
The escalating political uncertainty in Japan risks prolonging policy gridlock, thereby impacting the drafting of next year's budget and the timing of the Bank of Japan's next interest rate hike, casting a shadow over the fragile economic outlook. Prime Minister Shigeru Ishiba faces increasing calls for resignation within the ruling Liberal Democratic Party and is widely held responsible for the party's poor performance in the July Senate elections and last year's House of Representatives elections. Although Ishiba denies plans to resign, his declining approval ratings have sparked doubts about his political future, and leadership changes could influence fiscal and monetary policy trajectories.
The US dollar continued its decline during Asian trading hours today, extending the effects of Tuesday's soft Consumer Price Index (CPI) data. US Treasury Secretary Janet Yellen further urged the Federal Reserve to consider a 50 basis point rate cut in September to “offset” the delays caused by earlier easing measures. Despite the firm tone, federal funds futures indicate that markets have yet to fully accept Yellen’s proposal. Currently, there is a 94% probability of a 25 basis point rate reduction in September, with the remaining likelihood of no change. The possibility of a 50 basis point cut in September has not garnered significant attention among traders. The odds of a rate cut in October stand at 60%, though the consensus remains that only two rate cuts are expected throughout 2025.
Technical Analysis
In the 4H timeframe, the USDJPY price is currently experiencing resistance at the upper Bollinger Band and has retraced, now oscillating around the middle Bollinger Band. The MACD has generated a bearish crossover, while the RSI stands at 46, indicating the market is not oversold. If the price fails to hold above the middle Bollinger Band, it may decline toward the EMA200 and previous support levels at approximately 147.1 and 146.6. In the 1W timeframe, Bollinger Bands are narrowing, with price oscillating between the upper and lower bands. The MACD has formed a bullish crossover, with the MACD line and signal line approaching the zero axis, and the RSI is at 51, indicating a neutral stance. Overall, the weekly trend is consolidative, with potential for a trend reversal. Key support to monitor is whether the price can sustain above the middle Bollinger Band; a successful hold could lead to an upward breakout beyond 151, while failure to do so may see a decline toward 142. It is recommended to go short at the highs in the short term.
Trading Recommendations
Trade Direction: Sell
Entry Price: 147.8
Target Price: 146.6
Stop Loss: 148.6
Support: 147, 146.6, 145
Resistance: 148.6, 149, 151
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