USD/JPY Rebounds On Weak Japan Data, Positive Risk Sentiment

Fundamental Analysis

* Yen Fade: The USD/JPY pair has surged following a period of decline, driven by the strengthening of the US dollar amidst its recovery from recent setbacks triggered by a sell-off after the ISM Manufacturing PMI missed expectations, coupled with disappointing data from Japan. This includes reports of a continual decline in real wages for the 25th consecutive month in April, as Japan struggles with domestic inflation outpacing wage growth. The latest figures from the Labor Ministry indicate a 0.7% year-on-year decrease in real wages, underscoring the persistent challenge of rising living costs overshadowing any increases in pay. These economic conditions present obstacles for the Bank of Japan’s efforts to normalize policy, particularly in its ambition to raise the bank’s policy rate from its current ultra-low range of 0.0% to 0.1% and bolster the struggling Japanese currency.

Technical Analysis

* Technical Breakout: USDJPY was traded higher following recent rebound from its lows. MACD which illustrates diminishing bearish momentum signal suggest the pair to further extend its rebound.

* Resistance and Support: If the bullish momentum persists, there’s a strong likelihood that the price will potentially head towards 156.450. Conversely, a potential retracement is also to be expected and the price could head back towards 155.200.

Understand how technical analysis can help you in this trading opportunity.

Potential Risks

Moving forward, investors will pay close attention to upcoming labor indicators from the US, including the Non-Farm Payrolls (NFP) report and the Unemployment Rate, as they could significantly influence the direction of the dollar. Should the US data reflect weakness, aligning with recent trends, it might reverse the recovery rally of USD/JPY and cause the pair to fall back below the 155.00 level once more.

Know how to manage trading risks with risk management strategies.

Monitoring

Stay updated on US and Japan data, central bank updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.