The USD/JPY currency pair experienced a loss of momentum...

The USD/JPY currency pair experienced a loss of momentum after approaching the 140.25 mark during the Asian trading session. Traders and investors have been keeping a close eye on Japan's ultra-loose monetary policy, which has been a significant factor in influencing the pair's movement.

The recent decision by the Federal Reserve (Fed) also played a role in shaping the market. As a result of the Fed's decision, the US dollar faced a decline against various other currencies.

Looking ahead, market participants will be closely monitoring some key economic indicators in the US, including the Q2 GDP figures, weekly jobless claims, and durable goods orders, which are expected to be released later in the day.

However, the USD/JPY pair is currently facing pressure and struggling to break above the 140.00 mark as the European trading session begins on Thursday. It has experienced a decline for four consecutive days, with the current trading level at around 139.85, representing a 0.28% decrease for the day.

One of the primary factors impacting the market sentiment is Japan's ultra-loose monetary policy, with the Bank of Japan (BoJ) preparing to announce its interest rate decision on Friday. Market expectations suggest that the BoJ will maintain its current monetary policy while sticking to its yield curve control (YCC) objectives of -0.1% for short-term interest rates and 0% for 10-year bond yields.

Notably, Japan's core inflation rate has surpassed that of the United States for the first time in eight years, coming in at 3.3% in June, which is higher than the previous month's 3.2% and the expected 3.5%. This data indicates that Japan's inflation has remained above the BoJ's target of 2% for the 15th consecutive month.

Considering the inflation data, it is likely that BoJ policymakers will maintain a dovish stance to ensure inflation stays above 2%. BoJ officials have also emphasized their preference to analyze more data before making any adjustments to the monetary policy. The divergence in monetary policy between the BoJ and the Fed could exert pressure on the Japanese Yen against major currencies and potentially act as a headwind for the USD/JPY pair.

As for the US Dollar, the Federal Reserve has recently raised interest rates by a quarter percentage point, bringing the target range to 5.25%–5.5%. This decision led to a decline in the value of the US Dollar against other major currencies, as reflected in the weakening of the US Dollar Index (DXY) to 100.65, followed by a rebound to 100.90 on the previous day.

Federal Reserve Chairman Jerome Powell mentioned that although inflation has moderated somewhat since the middle of the previous year, the Fed's 2% target is still a considerable distance away. Powell also hinted that further rate hikes are possible, with the Fed taking incoming data into consideration for any additional adjustments. The prospect of the Fed nearing the end of its rate-hike cycles could potentially limit the upside for the US Dollar.

As the trading day progresses, market participants will be closely watching the release of the US preliminary GDP QoQ, weekly jobless claims, and durable goods orders for June. However, the focus will eventually shift to the upcoming BoJ meetings scheduled for Friday. Investors will closely monitor these developments to identify potential opportunities in the USD/JPY pair.


TurnAround Point : 140.50

Our preference

Short positions below 140.50 with targets at 139.40 & 139.00 in extension.