Facts:
- The Bank of Japan is considering raising its inflation forecast for fiscal years 2023-2024.
- Higher inflation could also lead to monetary policy normalization in the country, which in turn could strengthen the Japanese Yen.
- The dollar is running out of catalysts for growth due to recent comments from Fed members.
Recommendation:
- Short position at the current price on USDJPY.
- Take Profit 1: 147,000
- Take Profit 2: 145,000
- Stop Loss: 151,800
Opinion:
The Bank of Japan (BOJ) is contemplating raising its inflation forecast for fiscal years 2023 and 2024, suggesting that prices might meet or exceed the 2% target for three consecutive years. Discussions about revising the inflation forecast for the current fiscal year closer to 3.0% also remain open. Theoretically, an increase in Japan's inflation forecasts could positively impact the normalization of the BOJ's monetary policy. This has also raised hopes among investors for a return to positive interest rates, leading to a significant strengthening of the Yen. Officials view higher oil prices as a factor increasing inflationary pressure. Moreover, the Bank of Japan acknowledged that companies have passed on more costs to end consumers than previously expected.
On the other hand, the dollar is starting to lack fuel for growth after, in recent times, more and more bankers consider the current interest rate level as sufficient. The dollar also failed to strengthen following the escalation of the conflict in the Middle East.
USDJPY is consolidating at high levels below 150, suggesting weakening momentum of the recent upward trend. The MACD indicator seems to confirm the same, indicating a persisting divergence. For this reason, we recommend taking a short position on USDJPY and setting a stop loss for proper risk management.
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- XTB data
- A person preparing a recommendation
- Bartłomiej Mętrak
- Other persons participating in preparation of recommendation
- A name of entity supervising
- Date and hour of preparation of recommendation
- 10/17/2023 12:13 PM
- Date and hour of publication of recommendation
- 10/17/2023 12:28 PM
- A group of addressees of the recommendation
- XTB customers and potential customers
- Relevant information sources
- xStation5
- A time horizon for the recommendation
- Till reaching target or stop loss price
- Projected date of actualization
- Unspecified
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