On Monday, USD/JPY continues to decline, testing the minimum values of July 2023 in the region of 140.20. Pressure on the US dollar is increasing due to expectations of the upcoming easing of monetary policy by the Fed, whose two-day meeting begins tomorrow. The basic forecast still assumes a 25 basis point rate cut, but the probability of a more significant easing, by 50 basis points at once, has increased to 59%, compared with 30% last week. Investors also hope that the regulator's statements will contain signals about possible rate changes before the end of the year.
A meeting of the Bank of Japan is expected later in the week. Although experts do not predict further tightening of the regulator's policy, the comments of the Central Bank's management are interesting to investors. On Friday, inflation data in Japan for August will be published. The core consumer price index (excluding products) is expected to rise from 2.7% to 2.8%. This may strengthen the position of the Japanese regulator on the issue of raising rates. According to a Reuters poll conducted late last week, none of 52 economists expect a rate hike at the September meeting of the Bank of Japan, but 54% are confident that it will happen before the end of the year. The forecast for the rate at the end of the year remains at 0.50%.
The yen is also supported by positive data on industrial production in Japan. In July, it increased from 2.8% to 3.1%, and in annual terms — from 2.7% to 2.9%.
On the chart, technical indicators confirm the downtrend. The indicator of the Bollinger bands is directed downwards, indicating an increase in the "bearish" movement. The MACD shows a confident sell signal, and the stochastic turns to decline.
It is recommended to open short positions after a confident breakdown down to the level of 140.00. The first target will be 138.00. We will place the stop loss at the level of 141.00.
For purchases, we will wait for a rebound from the 140.00 level with a breakdown up to the 141.00 mark. The target is at 143.00. We will set the stop loss at 140.00.