USDJPY - Potential Daily Retracement comingFundamental Analysis
The Japanese Yen is doing great lately, thanks to a mix of factors. This makes the USD/JPY pair go down for the third day in a row. The official Chinese PMI numbers for May were not so good, which makes people worry about the global economy and look for safer options. The JPY is one of them, especially because the Japanese authorities might step in to stop it from falling too much.
Japan’s Vice Finance Minister for international affairs, Masato Kanda, said they will watch the currency market closely and do what they need to do. He also said they won't rule out any option. On top of that, the US Treasury bond yields are going down too, which makes the US-Japan rate difference smaller and favors the JPY. However, the Bank of Japan (BoJ) is not so keen on the JPY rising too much, so that might limit its gains.
Another thing that helps the USD/JPY pair stay afloat is the strong US Dollar. The USD Index, which measures the Greenback against other currencies, is near its highest level since mid-March that it reached on Tuesday. It is supported by the expectations that the Federal Reserve (Fed) will keep interest rates high for longer. The markets think that the US central bank will raise interest rates by another 25 bps at the June FOMC meeting.
The US economic data, such as the Chicago PMI and JOLTS Job Openings, will influence the USD demand. Also, pay attention to what the FOMC members say and how the US bond yields change. These factors will affect the USD/JPY pair too. And don't forget to check the overall mood of the market. It can give you some clues about the USD/JPY pair and help you find short-term opportunities.
Technical Analysis
As per the daily price action we believe USD/JPY, will very likely retrace to last broken high / Trenline zone (grey arrow) before seeing any true bullish move aiming for $144 price zone. That retracement could be deeper (see dotted grey arrow), and even more complex, i.e. through a corrective wave. Right now we are watching the current level for potential retracement, which could be a nice opportunity for a short.
