The USDJPY pair has quickly reversed it’s early dip to an intraday low level. But will the current level will be strong enough to accelerate core CPI inflation meaningfully? Today’s 22 May USDJPY Technical Outlook will provide more insights.
22 May, GKFX – The pair extended overnight retracement slide from over 4-month tops and was further weighed down by a negative trading sentiment around equity markets, which was seen underpinning the Japanese Yen’s safe-haven demand.
Easing US-China trade tensions/Fed rate hike expectations remain supportive
The corrective slide, however, remained shallow and the pair quickly bounced back above the 111.00 handle. Against the backdrop of easing US-China trade tensions, expectations that the Fed might be forced to raise interest rates aggressively continued underpinning the US Dollar and helped limit any immediate sharp downside.
Will recent JPY weakness change the BOJ stance?
Analysts at Nomura suggest that the recent recovery in USD/JPY will be a relief for the BOJ, but they do not think the current level will be strong enough to accelerate core CPI inflation meaningfully.
“It will need to overshoot to 120 or above in order for the BOJ to change its policy stance. At this level of USD/JPY, the BOJ is unlikely to change its policy stance in order to stop it appreciating further. It will take external headwinds, such as 1) broader risk-off moves and 2) a more dovish Fed, to stop the USD/JPY appreciation trend.”
Moving ahead, the latest FOMC meeting minutes, along with speeches by influential FOMC members and the release of US durable goods orders will influence the USD price dynamics and eventually provide some fresh directional impetus to the major.
22 May USDJPY Technical Outlook
Omkar Godbole, Analyst and Editor at FXStreet writes,
“the USD/JPY pair may have a tough time scaling the long-term descending trendline hurdle and risks falling back to 200-day moving average (MA) located at 110.18, courtesy of overbought conditions (daily RSI), bearish RSI divergence in 4-hour chart and short-term topping pattern in the 10-year treasury yield.”
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