USDJPY - POTENTIAL SELLThe USD/JPY pair reflects mixed market conditions, driven by economic indicators and central bank speeches. While the yen gains momentary support from indicators such as strong current account data (3.02T vs. expected 2.43T), the Japanese economy faces ongoing challenges, as seen in declining household spending (-1.9%) and weaker machine tool orders (-6.5%). In contrast, the USD shows resilience, with a potential inflationary tilt supported by upcoming CPI data and stable job market indicators. However, frequent FOMC speeches highlight uncertainties, with Fed members expressing caution on future rate adjustments, especially as the U.S. economic outlook softens. Overall, the USD/JPY movement appears to balance the Fed's careful rate stance against Japan's economic pressures, likely leading to a volatile yet relatively balanced exchange rate in the short term.
To strengthen the Yen in the coming week, the Bank of Japan (BoJ) could consider a few policy measures. First, BoJ might gradually reduce monetary easing by raising short-term interest rates or scaling back government bond purchases to curb inflation and enhance the Yen's appeal as a safe-haven asset. Additionally, BoJ could issue more hawkish statements, signaling an intention to normalize monetary policy, thereby raising market expectations for a stronger Yen. Finally, fiscal policies that support government spending to boost domestic purchasing power without excessively driving inflation could also add support to the Yen’s appreciation.
In the Wyckoff pattern, if USD/JPY is currently in a Purge or RTO (Return to Origin) phase, it could indicate a potential reversal and strengthen the Yen. This phase often signifies the final push by the smart money to trigger a liquidity purge, clearing out weaker positions. If this is happening near a supply zone, it can lead to a reversal as strong hands begin to enter short positions on USD/JPY.
A confirmed reaction here, such as a shift in market structure or bearish divergence, could support a Yen strengthening scenario. However, monitoring upcoming economic data and any shifts in the Bank of Japan’s policy statements remains essential to validate this trend.
