USDJPY maintains its upward momentum for the fourth consecutive day, resulting in a remarkable gain of 230 points. Currently, the currency pair is trading at 136.62, reflecting a 0.37% increase from the previous day's trading.
Japan is set to unveil its second-quarter GDP figures, which are anticipated to show a 0.2% quarter-on-quarter growth. This follows a downward revision of 0.0% in Q1. The nation's economy continues to face challenges, including weak domestic demand and a global economic slowdown, indicating a potentially arduous path ahead.
The Federal Reserve persists in conveying a hawkish stance regarding interest rates. Market expectations indicate a likelihood of a pause in rate hikes at the upcoming June meeting, but the probability has decreased from 95% to 75% according to CME's FedWatch. Despite a recent decline in inflation, it remains above the Fed's target of 2%, suggesting that the battle against rising prices is ongoing.
Richmond Fed President Tom Barkin stated that there are no barriers to raising rates if inflation remains high. He acknowledged a slight easing in demand but emphasized that it was not happening quickly enough to bring inflation down to the desired 2% level. Atlanta Fed President Raphael Bostic cautioned against rate cuts this year and warned of the possibility of increasing rates due to persistent inflation pressures, countering market expectations.
In terms of technical analysis, USD/JPY is currently testing resistance at 136.62, with the next resistance level at 137.08. On the downside, support can be found at 135.08 and 1324.42.
The ongoing rally in USD/JPY and the cautious monetary policy outlook expressed by the Federal Reserve have significant implications for forex traders. The strengthening of the USD against the JPY indicates a bullish sentiment toward the USD, potentially leading to increased demand for the currency in the forex market. Additionally, the Fed's hawkish stance on interest rates highlights the importance of monitoring inflation trends, as any unexpected shifts can have a substantial impact on forex trading strategies. Traders following the USD/JPY pair should closely track the Japanese GDP release, as it may influence market sentiment and lead to heightened volatility in forex markets.