USD/JPY is facing a significant week ahead as both the Bank of Japan (BoJ) and the Federal Reserve (Fed) are set to make key announcements. The BoJ is expected to move away from its negative interest rate policy following a surge in wage increases during Japan’s spring negotiations. Market anticipation is high, with reports suggesting the BoJ may raise interest rates to a range of 0.0-0.1%, up from the current -0.1%.
On the other hand, the Fed is also scheduled to release its latest Dot Plot summary of interest rate projections on Wednesday. With the US economy showing unexpected resilience and inflation remaining sticky, market expectations for rate cuts have decreased. The Fed’s previous Dot Plot projected three rate cuts by 2024, but market forecasts are now aligning more closely with the Fed’s own projections. As a result, odds of a rate cut in June have dropped from nearly 70% to around 50-50.
Looking ahead, the US Purchasing Manager Index (PMI) figures and Japanese Trade Balance numbers are set to be released later in the week, along with Japanese National Consumer Price Index (CPI) data. In terms of technical analysis, USD/JPY is currently hovering above the 149.00 level with resistance around 151.00. The pair’s momentum is currently favoring the bulls, with a bounce back from 146.50 indicating potential for further upside movement.