USD/JPY Daily Chart Analysis – 2024-05-14

The USD/JPY pair has risen by 0.28%, surpassing 156.05 and marking a crucial 50% retracement of its recent decline. This modest breakout was driven by the NY Fed survey highlighting higher inflation expectations. Attention now turns to key US economic indicators, with the Producer Price Index (PPI) due on Tuesday, followed by the Consumer Price Index (CPI) and retail sales data on Wednesday. The most recent year-over-year CPI hit a low of 3.0% in June 2023, with April’s forecast at 3.4% compared to 3.5%. Despite this, the Federal Reserve is still expected to cut rates by September, with a projected reduction of 43 basis points by year-end. Meanwhile, Bank of Japan (BoJ) swaps indicate a potential 10 basis point hike in July and a 23 basis point increase by the end of the year, following adjustments after the quantitative easing cut on Monday. Japanese Government Bond (JGB) yields have shown a gradual increase as the market’s pricing for Fed rate cuts remains uncertain.

From a technical analysis standpoint, a bullish scenario for USD/JPY involves a close above the May 2 high of 158.28, aiming for the 61.8% retracement level at 157.04. The May 1 high of 158 serves as the next pivot point, depending on favorable US economic data. On the other hand, dovish US data could see support at 155.50 and around 150. Additionally, the Ministry of Finance (MoF) might intervene if the pair’s rapid rise approaches the peaks observed in 2024 and 1990.