rose to 159.04 at the end of the week, marking the yen's second consecutive weekly decline. The Japanese currency came under pressure after weaker inflation data dampened expectations of an imminent Bank of Japan policy tightening.
in Japan it slowed to 1.4% in April, from 1.8% the previous month, the lowest level in four years. Furthermore, the indicator has remained below the Bank of Japan's 2% target for the third consecutive month.
At its April meeting, it sharply raised its core inflation forecast for the current year to 2.8%, up from 1.9%. The regulator attributed this revision to high oil prices amid the Middle East conflict and the continued passing on of business costs to consumers.
Further market attention has been drawn to reports that Japanese Prime Minister Sanae Takaichi is considering an additional budget to offset rising energy prices.
At the same time, markets continue to monitor the risk of new currency interventions. The yen remains close to the level of 160 per dollar, the level that triggered the interventions of the Japanese authorities in late April and early May.
Technical analysis
On the H4 chart, USD/JPY is trading within a consolidation range around 158.68 and moving towards 160.09. A test of this level is likely, followed by a possible pullback to 158.66, with room for a further decline towards 157.00. The MACD indicator supports this scenario, with its signal line above zero and pointing firmly upwards, indicating continued bullish momentum.
In the first half chart, USD/JPY reached 159.15 and retreated towards 158.80. A further rise towards 159.30 is possible, with the possibility of an extension towards 159.90. The stochastic oscillator confirms this scenario, with its signal line above 50 and pointing firmly towards 80, indicating that the short-term bullish momentum remains.
Conclusion
USD/JPY is expected to close its second consecutive week higher as the yen remains under pressure from weaker-than-expected Japanese inflation data. Core inflation slowed to a four-year low of 1.4%, falling further below the BOJ's 2% target and tempering expectations for a tightening of monetary policy in the near term. This contrasts with the BOJ's upgraded inflation forecast of 2.8%, driven by energy costs related to the Middle East conflict. With the pair hovering around the critical level of 160, where Japanese authorities intervened in late April and early May, markets remain on high alert for possible intervention. Prime Minister Takaichi's consideration of an additional budget to address energy prices adds another layer of complexity. Technically, a further rise towards 160.09 seems likely in the near term.
By RoboForex Analysis Department
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Disclaimer: Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
