Daily Analysis USDJPY - 14 July 2023

The Japanese Yen received a boost from a couple of developments in Japan. Firstly, there was a media report indicating that the Bank of Japan is likely to revise its inflation forecast for FY2023 to a level above 2% during the meeting scheduled for July 27 and 28. Until now, the Bank has consistently maintained its stance that the Consumer Price Index (CPI) would decline from around September/October this year. However, if this expectation is revised to a level above the 2% target, it would undermine one of the pillars supporting the continuation of ultra-loose monetary policy.

Additionally, during the session, Bloomberg conducted an interview with Hideo Hayakawa, a former chief economist and director at the Bank of Japan. Hayakawa expressed his anticipation that the Bank of Japan's policy board "will make some kind of adjustment to YCC this month," suggesting that adjusting the yield control by setting the tolerance band for the 10-year yield from 0.5% on either side of zero to 1% is a likely approach.

Shifting the focus to central banks, Federal Reserve Board Governor Christopher Waller addressed his economic and policy outlook during a speech before the Money Marketeers of New York University in the evening, Eastern time. Please refer to the previous posts for his specific remarks, but notably, Waller mentioned that the upcoming September Federal Open Market Committee (FOMC) meeting is significant. However, he also highlighted that if the next two Consumer Price Index (CPI) readings resemble the previous two, the data would suggest a possible halt to certain actions.

The USD/JPY pair has received support at the notable historical level of 138.00 after experiencing six consecutive days of decline. Currently, a corrective movement is underway, with the initial level located at 138.70, followed by 140.25. Additionally, both the 2-year and 10-year yields are undergoing corrections, which appears to be beneficial for the pair as well.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
142.00	141.20	140.22	139.00	138.00	136.00