After last week’s PCE shock, this week started with Bank of Japan’s governor nominee Ueda’s dovish comments. When Ueda’s name first hit the news, the Japanese yen rose with expectations of a possible change in ultra-dovish monetary policy. However, since then, Ueda’s remarks have shown no indication of any policy change.
This morning, Ueda reiterated that monetary easing should continue for now, adding that “the benefit of stimulus outweighs the side effects.” Ueda supports Abenomics and the 2% inflation target. Last week, Japan’s national CPI was announced at 4.3%, the highest since 1981. Despite this, Ueda expects inflation in 2023 to fall below 2%.The next inflation gauge is at this Friday, surveyors expect Tokyo CPI to fall %3.3 from %4.4 for February.
Many analysts expect that BOJ’s policy will be reviewed in the summer. This expectation is slowing the USDJPY surge for now, but a clear uptrend is forming. This week, 137 will be a key resistance level to follow. The upper line of the trend channel, 100- and 200-day moving averages, and 38.2% of the latest fall are converged around this level. Unless it is broken, a small correction could happen before more upward moves. On the other hand, US PCE pressure, along with Ueda’s recent remarks, could create enough fuel for a more aggressive uptrend. The 50-day moving linear regression slope also signals an increase in momentum.
136.50 is a minor resistance level that is currently holding back the USDJPY advance. If a small correction begins from here, a possible target for downside moves could be in the range of 135-135.30. However, this zone could also be the next step in the new short-term upward wave.
This week, important data to follow for USDJPY moves includes industrial production and Tokyo CPI from Japan, as well as ISM and jobless claims from the US.
