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Fundamentals

During Friday's (June 30th) Asian session, USDJPY oscillated narrowly and it is currently trading near 144.7. Besides, the overall volatility of yesterday is fair, with fluctuations in the range of 144.1-144.9 and an amplitude of 0.8. The release of U.S. economic data overnight continued to be better than expected, reinforcing the expectation of two interest rate hikes again. It also supported the rebound of USDX and U.S. treasury bond yields, and the USD stood above 103.4, a key resistance position. The USDJPY bulls became more aggressive and boosted USDJPY upward, once reached the highest level at 144.9, but failed to cross above 145. In addition, the USDJPY broke through the high of 145 in the morning session but failed to stand firm, and now retraced to 144.7. Now, the sharp depreciation of the JPY has brought a new wave of price increases in Japan. According to data released last Friday, Japanese consumer prices rose faster than expected in May, and the depreciation of the JPY will raise the prices of imported goods, thus fueling the inflationary trend. Moreover, the current exchange rate depreciation is backfiring on the Japanese economy worse compared to last year at the same exchange rate, simply because inflation in Japan is now also surging up rapidly. While the Bank of Japan is currently trying verbal intervention, it is now a real risk that perhaps currency market intervention is close at hand.

Data: The final revised data released by the U.S. Department of Commerce showed that U.S. GDP grew 2% YoY in the first quarter of 2023, an upward revision of 0.7% from the previously released revised data and beating market expectations of 1.4%. At present, the strong economic growth means the Fed has enough room to continue raising interest rates and bring inflation down to its 2% target.

Today's focus: The U.S. core PCE index for May, which will be released tonight.

Technical Analysis

Daily chart: The current USD/JPY SMAs are diverging side-by-side, the slope of the rise is also smooth, and the general trend is ascending. However, the MACD is at a high oversold area, and it is harder now for USD/JPY to appreciate further. Furthermore, yesterday's session stopped at 145. Although it tested 145 during today's morning session, it retreated to 144.7 and oscillated later, and new supportive factors are needed. Regarding the bears, it needs time to develop, while the initial support below is still at 142.5, and further strong resistance at 138.6. At the same time, the resistance above also remains unchanged, with the initial and further resistance at 145 and 152 respectively.

Today's trading plan: Now USD/JPY is at an absolute high level, and each step up is difficult. Thus, it is better to keep a bullish view but don't go long. Today, try to stop loss at key levels with small positions, or keep short near 144.8, with the stop-loss setting above 145.1 and taking profits at 142.5.

Trading Recommendations

Trading direction: Short

Entry price: 144.8

Target price: 142.5

Stop loss: 145.1

Support: 142.500/140.500

Resistance: 145.000/152.000