Current trend

The USD/JPY pair is showing flat trading, holding close to 157.62 and local highs from April 29, when the yen showed "bullish" dynamics in response to currency interventions by the Bank of Japan.

Last Friday, officials kept interest rates in the range of 0.00-0.10% and also announced their intention to reduce purchases of government bonds after the next meeting, scheduled for July 30 and 31. Eight out of nine board members voted in favor of this decision, and after analyzing the views of market participants, the regulator will present a detailed plan to reduce the record balance sheet, thus taking another step towards completing a course of massive monetary stimulus aimed at "ensuring that long-term interest rates will be formed more freely in the financial sector." Analysts at The Goldman Sachs Group Inc. expect that the Bank of Japan will gradually reduce the amount of monthly purchases of government bonds from 6.0 trillion yen to 5.0 trillion yen, the yield on 10-year bonds will reach 2.0% by the end of 2026, and the key rate will be 1.25-1.50% by 2027. At the same time, the Governor of the regulator, Kazuo Ueda, allowed borrowing costs to increase in July, as the weakness of the national currency leads to increased import costs, but officials noted that when making decisions they will be guided by incoming economic data.

In turn, last week the US Federal Reserve kept the indicator at 5.50%, indicating that in order to switch to "dovish" rhetoric it is necessary to wait for a steady decline in inflation towards the target of 2.0-3.0%. In addition, for the first time in three months, the Fed published updated forecasts for the dynamics of borrowing costs: at the end of 2024 it is expected to decrease from 5.50% to 5.10%, which is significantly higher than the March estimates of 4.60%. According to the Chicago Mercantile Exchange (CME) FedWatch Tool, it is more likely that interest rates will be adjusted by 25 basis points twice before the end of this year.

Support and resistance

On the daily chart, the price is trading within the ascending channel 160.20–156.30, moving away from the support line.

Technical indicators are holding a buy signal, which is actively strengthening: fast EMAs on the Alligator indicator are moving away from the signal line, and the AO histogram, being in the buy zone, is forming new ascending bars. 

Support levels: 156.70, 154.70.

Resistance levels: 158.30, 160.20.

Trading tips

If the resistance level is overcome and the asset continues to grow, as well as consolidating above 158.30, buy positions with a target of 160.20 will become relevant. Stop-loss — 157.20. Implementation time: 7 days and more.

If the asset reverses and declines and the price consolidates below the level of 156.70, short positions can be opened with the target at 154.70. Stop-loss — 157.30.