USD/JPY inflection point analysts: Focus on the 50-day moving average support, if you lose the code or welcome more than 300 points of decline

Forex documentary community- In Asia on Thursday (June 6), the dollar/yen volatility weakened, falling as low as 155.36. It is currently trading around 155.70, and the path of yen depreciation seems to have reached an inflection point. The Bank of Japan hinted that the depreciation of the yen may affect the trend of interest rates, paving the way for a black swan event that may raise interest rates. The analysis pointed out that traders need to be wary of the dollar/yen falling below the key moving average and fear falling towards the support level of 151.68.

USD/JPY 15-minute chart

Recent economic indicators have supported a more meaningful discussion at the Bank of Japan about raising interest rates, with average cash receipts rising 2.1 per cent year-on-year in April after rising 1.0 per cent in March. April data reflect the outcome of spring wage negotiations.

Rising wages are likely to increase disposable income, spur consumer spending and demand-driven inflation, and the Bank of Japan may raise interest rates to achieve price stability. #JapanMarket #

In addition, the Jibun Bank services PMI fell slightly to 53.8 in May from 54.3 in the initial reading of 53.6. Job creation was the highest since 2007, while input price inflation fell from an eight-month high in April.

The reaction to the latest economic data needs to be taken into account, and support for recent interest rate hikes could boost buyer demand for the yen.

In addition to the data, investors are also watching the impact of the weaker yen on the Japanese economy. Ryozo Himino, deputy governor of the Bank of Japan, reportedly highlighted the impact of yen movements on the Japanese economy on Tuesday, saying: "Exchange rate fluctuations affect economic activity in various ways. In addition to the direct impact on import prices, it also affects inflation in a broad and persistent way." #BoJ Dynamics #

His comments hinted that continued weakness in the yen could affect interest rates at the Bank of Japan.

There was no data available for Japan on Thursday, and investors were waiting for April household spending data on Friday.

Later on Thursday, U.S. labor market data will be worth investors' attention.

Economists forecast initial jobless claims to rise from 219,000 to 220,000 in the week to June 1. Preliminary data show unit labour costs and non-farm productivity rising by 4.9 per cent and 0.1 per cent respectively in the first quarter of 2024.

An unexpected spike in jobless claims could increase investor bets on the Federal Reserve's September rate cut. Weak labor market conditions could weigh on wage growth and reduce disposable income. A downward trend in disposable income could weigh on consumer spending and dampen demand-driven inflation. The net effect could be a less hawkish trajectory for the Fed's interest rates.

Unless there are significant revisions to preliminary unit labor cost and non-farm productivity data, jobless claims are likely to have a greater impact on the USD/JPY.

The ISM services PMI in the US surged better than expected on Wednesday to 53.8 from 49.4 in May. However, the ISM services employment index rose to 47.1 from 45.9, indicating that the economy is still shrinking, albeit less sharply. In addition, ADP reports showed that private sector employment growth was lower than expected. The reports suggest that the US labour market environment is weakening.

In the short-term outlook, the near-term direction of USD/JPY will depend on Japanese household spending data and the US employment report. A surge in household spending and lower-than-expected US wage growth data could affect buyer demand for USD/JPY. Nonetheless, interest rate differentials still favor the dollar.

USD/JPY technical analysis

FXEmpire analyst Bob Mason said that USD/JPY broke through the 50-day and 200-day EMA smoothly, confirming a bullish price signal.

A break above the level of 156.500 USD/JPY could push bulls towards the 158 level, and a return to the 158 level USD/JPY would support its rise to the April 29 high of 160.209.

On the contrary, a fall below 155 USD/JPY will bring the 50-day moving average 154.88 into play. A fall below the 50-day moving average could signal a fall towards the support level of 151.685.

The 14-day RSI was 50.67, indicating that the USD/JPY pair will recover to 160 and then enter the overbought zone.

Beijing time 10:09, the dollar against the yen is now 155.65/66.