Chart of The Day USD/JPY
USDJPY is one of the FX pairs that may see elevated volatility until the end of the week. This is because of a number of top-tier releases and events from the United States and Japan, scheduled for the final two days of the week. Traders will be offered a flash release of Q1 GDP report from the United States today at 1:30 pm BST and PCE inflation data for March tomorrow at 1:30 pm BST. In between those two releases, the Bank of Japan will announce its monetary policy decision.
The US GDP report is expected to show a slowdown in annualized growth rate from 2.6% in Q4 2022 to 2.0% in Q1 2023. PCE inflation for March is expected to show deceleration in core measure from 4.6 to 4.5% YoY. However, a rate decision from the Bank of Japan is potentially the biggest volatility event of the three. This will be the first BoJ meeting after Ueda took over as governor and because of that there are hopes that he may push for a change in BoJ’s ultra-loose monetary policy. While it looks rather unlikely that any major policy change will be delivered tomorrow, one cannot rule out significant changes in an accompanying statement. Any hints at a hawkish shift could be a significant driver for USDJPY moves.
Taking a look at USDJPY chart at H4 interval, we can see that the pair has been trading in an upward channel since late-March. Advance was halted recently at 61.8% retracement of the downward move launched on March 8, 2023 (134.77 area) and the pair started to pull back. However, unless we see a break below the lower limit of the channel and below the lower limit of the Overbalance structure later on, technical picture continues to favor buyers.