Potential Bullish on USD/JPY

0 comments

Potential Bullish on USD/JPY

Summary:

The Fed kept rates unchanged in June, raised its inflation outlook, and hinted at only one rate cut in 2024. This stance could benefit the USD as market expectations adjust. The BoJ maintained its JGB purchases, weakening the yen. Governor Ueda hinted at possible tapering in July but remained cautious, suggesting further JPY weakening.

USD/JPY 4H

Macro View:

USD: In June, the Federal Reserve kept interest rates unchanged but raised its inflation outlook while maintaining its growth outlook. Consequently, the Fed revised its rate outlook, with the updated dot plot indicating only one rate cut in 2024, a more hawkish stance compared to the May meeting. Chair Powell emphasized that the Federal Open Market Committee (FOMC) is not yet ready to cut rates, despite welcoming the softer-than-expected CPI data for May. He stressed that the Fed is data-dependent and wants more evidence of inflation deceleration before easing policy. Since US rate market expectations have not fully aligned with the updated Fed dot plot, the USD could benefit as rate cut expectations are adjusted further.

JPY: The yen weakened during the BoJ meeting, as the Bank of Japan once again failed to meet market expectations of slowing the pace of JGB purchases, which remains close to JPY 6 trillion. However, during Governor Ueda's press conference, he mentioned that the BoJ would only consider tapering bond purchases at the July meeting. Ueda also noted that uncertainties over the inflation outlook remain "high" and that the BoJ is "paying close attention" to the FX impact on inflation, acknowledging that further yen weakness could increase inflation. Overall, Ueda's tone remained cautious, indicating a continuation of accommodative policy despite a hawkish tone on July meeting expectation. As a result, the JPY could weaken further as investors push back against the likelihood of a more aggressive tightening cycle.

 

DXM: A Tool to Gauge Retail Sentiments

USD/JPY Current Retail Long/Short Position

The DXM shows that 37% of traders are bullish, while the remaining 63% are bearish, reflecting the predominant retail sentiment. This sentiment offers a contrasting trading opportunity since retail traders tend to consistently lose money in the long term.


Seasonality Analysis: The Historical Movement of the Currencies  

USD Futures’ seasonality movement

The seasonal pattern for the USD suggests bullish momentum in the near term.

JPY Futures’ seasonality movement

The seasonal pattern for the JPY suggests bearish momentum in the near term.

Sources: Prime Market Terminal

 

Disclaimer: This material is provided for informational purposes only and does not constitute financial, investment or other advice. No opinion contained in this material constitutes a recommendation by Trive International or its author as to any particular investment, transaction or investment strategy and should not be relied upon in making any investment decision. In particular, the information does not consider the individual investment objectives or financial circumstances of the individual investor Trive International shall not be liable for any loss, damage or injury arising from the use of this information. Trive International may or may not be able to provide equity in the companies. The value of your investment may go down as well as up.

 

Comments

No comments

Leave a comment
Your Email Address Will Not Be Published.

Trive

TriveHub

TriveHub_LogoWhitev3
TriveHub, where financial empowerment begins. 

Explore our comprehensive financial education platform, where market insights, expert guidance, and premium content come together to shape your investment journey. Whether it's stocks, currencies, or cryptocurrencies that pique your interest, we provide the knowledge you need to make informed decisions.
All financial products traded on margin carry a high degree of risk to your capital. They are not suited to all investors, and you can lose more than your initial deposit. Please ensure that you fully understand the risks involved and seek independent advice if necessary. For further information, please see our full Risk Disclosure, Terms of Business, and Privacy Policy. 
We use cookies to support features like login and allow trusted media partners to analyze aggregated site usage. Keep cookies enabled to enjoy the full site experience. By browsing our site with cookies enabled, you are agreeing to their use. Review our cookie information for more details.
This website (trivehub.com) belongs to Trive International, and it is the registered trademark of Trive International Ltd. Trive International Ltd. is authorized and regulated by the British Virgin Islands’ financial authority, named Financial Services Commission (“FSC BVI"), under the company number 1728826 and license number BVI SIBA/L/14/1066.

© 2024 Trivehub

Trivehub is operated by Trive International. The information on this site is for informational purposes only and does not constitute investment advice.