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Lack of Bearish Confidence Will Drive Markets Back to Uptrend
Central Bank
Forex
Summary:
In May, Japan's CGPI decreased to 3.2%, while food inflation persisted. Bank of Japan Governor Kazuo Ueda reiterated a gradual tightening approach, indicating limited scope for interest rate cuts.
Buy
TradingUSDJPY
EXP
145.239
Entry Price
149.500
TP
142.300
SL
144.446 +0.425 +0.30%
0
Point
Flat
142.300
SL
CLOSING
145.239
Entry Price
149.500
TP
Fundamentals
During Wednesday's European session, the Japanese yen continued its consolidation, currently hovering near a two-week low against the U.S. dollar. Data released earlier today indicated a slowdown in Japan's May annual wholesale inflation, easing pressure on the Bank of Japan to tighten monetary policy.
The May Corporate Goods Price Index revealed a sharper-than-anticipated deceleration, dropping from 4.1% to 3.2%, below the forecasted 3.5%. This decline reflects a broad deflationary trend in upstream prices, supported by the recent yen rebound. Import prices, denominated in yen, experienced a significant year-over-year plunge of 10.3%, exceeding the 7.3% drop in April.
Raw material costs across various sectors decreased notably, with steel prices falling by 4.8% year-over-year, chemical product prices by 3.1%, and non-ferrous metal prices by 2.1%.
However, inflation within consumption-related categories exhibited greater persistence. Food and beverage prices increased by 4.2% year-over-year, up from 4.0% in April, indicating that inflationary stickiness in essential goods remains a challenge despite the overall economic cooling on the production side.
Bank of Japan Governor Kazuo Ueda stated that Japan is "still some distance away" from achieving its 2% inflation target, which led to a weakening of the yen. Although he denied the possibility of a rate cut and emphasized that current interest rates are low and should be raised appropriately in the future to preserve stimulus space, his mention of potentially needing to support the economy was interpreted by the market as a possible delay in interest rate hikes, thereby weakening the yen. However, the depreciation of the yen was also influenced by the overall strengthening of the U.S. dollar.
Technical Analysis
The USDJPY maintained its bullish trajectory on Wednesday, trading around 145.00 during the European session, nearing a two-week high. The yen continued to experience downward pressure due to diminished demand for safe-haven assets, fueled by positive sentiment surrounding China-U.S. trade negotiations.
On the upside, a breach of the 146.27 resistance level would signal the completion of a corrective phase from the 148.64 level.
The intraday outlook remains bullish, with a break above the 148.64 resistance level and beyond, resuming the upward momentum from the 139.87 low.
However, a sustained hold above 142.10 would lead to a retest of 139.87.
Trading Recommendations
Trading Direction: Buy
Entry Price: 144.50
Target Price: 149.50
Stop Loss: 142.30
Valid Until: June 26, 2025 23:55:00
Support: 144.46, 143.97, 142.96
Resistance: 145.91, 146.27, 148.66
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