The Bank of Japan may raise interest rates at this month's meeting.

The Japanese yen has been continuously weakening due to the significant interest rate differential between Japan and the United States. Additionally, the Bank of Japan's reluctance to tighten its monetary policy has also impacted the currency's value. There are predictions that the BOJ may raise interest rates at its next policy meeting in late July.

The weakened yen has also increased import costs, leading to stronger inflationary pressures and directly impacting household consumption through rising prices of goods and services. Meanwhile, Finance Minister Shunichi Suzuki indicated that the government is closely monitoring the yen's movements, as excessive yen depreciation could have negative effects on the overall economy.

Japan's inflation rate rose to 2.8% year-on-year in May, up from 2.5% in April. Electricity prices have surged rapidly after government energy subsidies ended, which also contributed to rising food prices.

The core consumer price index (CPI) in Tokyo increased by 2.1% year-on-year in June, higher than market expectations and the BOJ's 2% target. This is another reason why the central bank may need to tighten its policy. The increase in core CPI in recent months has been driven by continuous wage increases, enhancing household spending power.

Japan's unemployment rate remained steady at 2.6% in May, in line with market expectations, but it is still the highest rate since September 2023. The number of unemployed people decreased by 10,000 to 1.82 million, while employment increased by 10,000 to 67.61 million. However, the ratio of job openings to applications has continued to decline, indicating a contracting economy.

The yield on 10-year Japanese government bonds rose to 1.08% as investors assessed the BOJ's monetary policy outlook amidst the rapidly weakening yen. Some analysts predict that the BOJ may raise interest rates at this month's policy meeting, but given the stable economic data in the United States, the likelihood of a rate cut this month has further decreased.

Techical analysis data (5H)

Resistance: 161.59, 161.69, 161.74

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 161.39 - 161.45 but cannot break the support at 161.45, you may set a TP at approximately 161.69 and SL at around 161.3 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 161.59 - 161.69, you may set a TP at approximately 161.74 and SL at around 161.39 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 161.59 - 161.69 but cannot break the resistance at 161.59, you may set a TP at approximately 161.39 and SL at around 161.74 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 161.39 - 161.45, you may set a TP at approximately 161.3 and SL at around 161.69 or according to your acceptable risk.

Pivot point July 2, 2024 08:25 PM. GMT+7