USD/JPY, FTSE Forecast: Two trades to watch

USD/JPY looks to US CPI data

• USD/JPY could test 152.00 resistance on hot CPI report
• Ueda sticks to accommodative outlook
• USD/JPY threatens to test 152.00

USD/JPY is inching towards the 152 level despite rising Japanese PPI inflation and ahead of the US consumer inflation data.

This main show in town this week is US inflation data which is expected to tick higher to 3.4% YoY in March, up from 3.2% in February. Core inflation is expected to ease lower to 3.7% from 3.8%. These figures are considered critical for providing more clues about the timing of Fed interest rate cuts this year.

The data comes after hotter than expected US non-farm payrolls and data last week showing that the US manufacturing sector returned to growth.

The market is currently pricing in just a 50/50 probability of the Fed cutting rates in June and sees just 60 basis points of rate cuts this year, down from 75 a few weeks earlier.

Meanwhile, the Atlanta Federal Reserve bank president Raphael Bostic reiterated his expectations for just one interest rate cut this year, reinforcing hawkish expectations.

Hotter than expected inflation data could raise concerns over the persistent nature of inflation and support the view the Fed will need to keep rates high for longer boosting the dollar.

Meanwhile, the yen trades under pressure despite data showing that PPI in Japan rose 0.8% YoY in March up from an upwardly revised 0.7% YoY in February marking the highest reading since October last year.

Bank of Japan governor Kazuo Ueda gave mixed messages in his semi-annual report on currency and monetary policy saying that accommodative financial conditions will be maintained for some time. He added that the central bank would consider reducing monetary stimulus if inflation continued to accelerate.

Meanwhile, Finance Minister Suzuki is keeping intervention threats alive, saying that the authorities would not rule out any measures in dealing with excessive moves in the yen. 152.00 is considered the line in the sand for intervention.

USD/JPY forecast technical analysis

USD/JPY continues to trade in a holding pattern capped by 152.00 on the upside and 150.80 on the downside, the April low and February high.

Should USD/JPY break above 152.00, which is considered to be the line in the sand for intervention, the yen could weaken to 155.00, the next level.

Meanwhile, a break below 150.80 could open the door to 150.00, the psychological level.

FTSE shrugs off China’s downgrade

• Fitch downgrades China’ credit rating
• Resource stocks rise tracking oil & metal prices higher
• Tesco impresses
• FTSE extends gains towards 8000

The FTSE is rising with its European peers as investors brush off a China ratings downgrade and look ahead to US CPI data.

The FFTSE has surged 1%, rising towards 8000, boosted by strength in resource stocks in the banking sector.

Energy stocks are up over 1% thanks to rebounding oil prices amid Middle East tensions, while industrial metal miners have risen just shy of 1%, boosted by copper, which is at a 14-month high.

Metal prices have shrugged off news that Fitch cut its outlook on China's sovereign credit rating to negative. The rating agency cited risks to public finances as the economy faces rising uncertainties. The move follows a similar move by Moody's in December and reflects the more challenging situation in China's economy amid decelerating grow and rising debt levels.

Fitch forecasts Chinese economic growth, will slide to 4.5% in 2024, down from 5.2% last year.

Tesco is rising after posting a pre-tax profit of £2.3 billion, up from £882 million as sales rose 4.4% across the period. Tesco see inflation pressures falling.

Attention is now turning to US inflation data which will be released shortly. Equity markets have remained strong and relatively upbeat despite rising treasury yields in the US and worries that the Fed could keep interest rates higher for longer. Hotter-than-expected inflation could hurt risk sentiment, pulling stocks lower.

FTSE forecast – technical analysis

The FTSE has recovered from 7880 support and is extending gains towards the 8000-8016 zone, the 2024 high. If buyers extend the bullish momentum and rise above here, 8045, the ATH, comes into focus.

Support can be seen at 7880, the January 2023 static support, which is also the confluence with the 20 SMA, which has been guiding the price higher. A break below here and 7860 the April low could see sellers look towards 7800.