Current trend

USD/JPY quotes continue their upward movement with a target of 161.70 after the publication of American data on the Personal Consumption Expenditures — Price Index.

The Core CPE adjusted to 2.6% from 2.8% in annual terms, meeting analysts' expectations; however, despite the positive dynamics, the value still exceeds the US Federal Reserve's target of 2.0%. In turn, in monthly terms the index added 0.1%, while the previous value was adjusted from 0.2% to 0.3%. The growth of personal consumption expenditures is a key indicator for the American regulator when making decisions on monetary policy: if the indicator exceeds the target levels, the interest rate may remain high longer than expected, leading to strengthening of the US dollar. Five-year Consumer Inflation Expectations from the University of Michigan also indicate easing price pressures: in June, the figure adjusted from 3.1% to 3.0%. The US dollar was also significantly supported by June data on the Consumer Confidence Index from the University of Michigan: the indicator rose from 65.6 points to 68.2 points, with a forecast of 65.8 points.

Meanwhile, inflation rates do not allow the Bank of Japan to concentrate on pursuing a more "hawkish" monetary policy that could stimulate the growth of the national currency. Statistics released Friday showed that the Tokyo Consumer Price Index rose slightly in June from 2.2% to 2.3%, while the CPI excluding Food and Energy fell from 2.2% to 1.8%. Despite this, the Japanese Ministry of Finance confirmed that officials did not conduct foreign exchange interventions in June, which ultimately contributed to the further weakening of the yen.

The long-term trend remains upward: the USD/JPY pair is growing with a target at 161.70, in the event of an upward breakdown of which the next target will be 164.07. A breakout of the level of 164.07, in turn, will lead to a strengthening of quotes to the area of 166.50. If sellers hold the resistance level of 161.70, the price will go into a correction, which will allow the instrument to continue its upward dynamics: the nearest support level, from which new purchases can be considered, is at 159.15, and the target is 161.70. The RSI indicator (21) is approaching the overbought zone, which may mean the development of a downward movement in the medium term.

The medium-term trend remains upward: the USD/JPY pair is approaching zone 2 (162.62–162.09), and if it is broken out, the movement will continue to the levels of 168.31–167.75. If the "bears" hold target zone 2, a downward correction will begin to the area of key trend support 156.04–155.55, after reaching which it is worth considering new purchases with a target at the weekly high of 161.20.

Support and resistance

Resistance levels: 161.70, 164.07, 166.50.

Support levels: 159.15, 156.60, 154.28.

Trading tips

Long positions may be opened from the level of 159.15 with target at 161.70 and stop-loss at 158.35. Implementation time: 9-12 days.

Short positions may be opened from the level of 158.35 with target at 156.60 and stop-loss at 159.15.