#worldnews #BOJ #PCE⚠️ BOJ is not ready for intervention: what will happen to the yen?⠀
The Japanese currency remains vulnerable and risks renewing the annual minimum. Under these conditions, the monetary regulator may again resort to desperate measures and try to support the national currency classically—by injecting "empty" money into the market.
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The huge gap between interest rates in Japan and the U.S. remains the fundamental reason for the yen's weakness and continues to pressure the currency despite the interventions.
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Another significant event on the horizon is the U.S. inflation report, which could serve as a potential trigger for the BOJ. However, it's important to note that traders view such a move as extremely risky. The
PCE reading in this report will be crucial to the U.S. interest rate outlook, and therefore to the yen. It could quickly offset the effect of any premature intervention, making it a key factor to watch in the coming days.
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The yen has already depreciated 12% against the dollar this year. The BOJ has already implemented interventions in April and May, but they were limited to verbal warnings this week. A strong
PCE report could trigger active volatility and send the yen towards 163. USD/JPY needs to work out the reaction to the U.S. stats fully, and only then will the regulator risk entering the market.
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Japan, which has already spent a record 9.8 trillion yen ($61.4 billion) in recent interventions, has much at stake. The yen's weakness is hurting Japanese consumers and increasing anxiety among businesses.
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Nevertheless, Friday's data is expected to show signs of continued cooling of inflation in the U.S., which will strengthen the case for a cut in the federal funds rate this year and partially relieve some of the pressure on the yen.
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We'll see how that plays out. In any case, it is not recommended to open new positions on USD/JPY now.
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Profits to y’all!