USDJPY Forecast: Key Levels for BOJ and FOMC Week

Key Events for Today

Tokyo CPI Inflation
US Core PCE

Key Events for Next Week

BOJ Policy Meeting (Wednesday)
Fed Rate and FOMC Meeting (Wednesday)
Non-Farm Payrolls (Friday)

The latest Tokyo CPI Inflation metric recorded an uptick from the previous 2.1%, in line with the expected 2.2%. With inflation rates trending upwards, the chances of tightening monetary policies are increasing. With the dollar facing the chances of a rate cut, the USDJPY pair is retesting May 2024 lows.

Today's release of the Fed’s favored inflation gauge, the Core PCE, will be closely monitored to assess the direction of FOMC and Fed rate impacts on the markets next week. Following a stronger-than-expected US advance GDP on Thursday, the markets experienced a slight sense of relief regarding recession risks.

Upcoming BOJ Meeting

The market anticipates tighter policies at the next BOJ policy meeting. While rate hikes are not guaranteed, the meeting will outline debt operation plans towards reducing bond purchases and testing the sustainability of current rates.

Upcoming FOMC Meeting, ISM Manufacturing PMIs, and Non-Farm Payrolls

Following the BOJ decision on Wednesday, polls are still inclined towards the start date of a Fed rate cut in September. Given a stable rate, the FOMC meeting is set to ripple volatility considering recent economic updates on disappointing earnings, recession risks, and inflation rates. The ISM Manufacturing PMI and non-farm payroll growth will be watched afterwards for assessing the US economy’s outlook.

Technical Outlook

USDJPY Forecast: USDJPY – Daily Timeframe – Log Scale

Source: Tradingview

Bullish Scenario

The USDJPY daily RSI is deeply oversold, retesting December 2023 lows. From a price action perspective, the latest low aligns with the May 2024 low and the bottom end of the projected parallel channel from the year’s primary trend, forming a dragonfly doji candlestick pattern.

The dragonfly doji, a reversal pattern, has no body but an extended lower wick, reflecting the bears' inability to sustain the latest lows.

A reversal from the latest 151.94 low could potentially realign with the 157.80-158 zone and 160 levels.

Bearish Scenario

A close below 151 can potentially drag the trend towards the January 2024 high and the 0.618 Fibonacci retracement of the yearly trend near 148.80.

--- Written by Razan Hilal, CMT

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.