USD/JPY, Oil outlook: Two trades to watch

USD/JPY rises ahead of a big week for the Fed, BoJ

Japan’s PPI cooled to 5.1%
BoJ official warns not to expect policy change this week
USDJPY trades in a symmetrical triangle

USD/JPY is edging lower at the start of the week after cooler-than-expected Japanese PPI and dovish comments from a BoJ official, and as investors look ahead to the central bank bonanza this week.

Japan’s PPI cooled to 5.1% YoY, in May, down from 5.8% in the previous month and below forecasts of 5.5%. This marked the fifth consecutive month that PPI cooled. PPI is often considered a lead indicator for CPI, suggesting that consumer prices could start easing from the current 4-decade high.

The data comes ahead of the BoJ meeting on Friday. BoJ’s Deputy Governor Masazumi Wakatable ruled out any policy change, warning not to expect change from the BoJ this month’s meeting.

Meanwhile, the USD is rising against its major peers after losses last week. The Federal Reserve will announce its rate decision on Wednesday. The market is pricing in a 70% probability that the US central bank will skip a June hike after a slew of weaker-than-expected data, including ISM services PMI, jobless claims, and factory orders.

Looking ahead, both the US and the Japanese economic calendar are quiet. Attention will turn to US inflation data tomorrow, which is expected to see CPI cool to 4.1%, but core CPI rises to 5.3%.

USD/JPY outlook -technical analysis

USD/JPY trades within a two-week symmetrical triangle pattern, with buyers looking for a break above 140.00 to ring 140.95 the 2023 high into play.

Sellers could look for a breakout below 138.80, to test 138.40, the June low. A break below here exposes the multi-month rising trendline support at 137.20.

Oil falls below $70

Oil slips ahead of this week’s Fed meeting
Iran’s nuclear deal in focus
WTI oil trades rangebound 74.50 – 67.00

Oil has fallen below $70 at the start of the week as investors look ahead to the Fed rate decision and amid concerns over China’s demand and rising Russian supply.

Oil fell last week after disappointing Chinese data raised concerns over the strength of the recovery of China, the world’s largest importer of oil. This offset the production cut of 1 million barrels a day announced by Saudi Arabia.

Also, on the supply side, Russia’s oil exports to China and India have grown despite the EU restrictions and G7 price cap mechanism, which started in December. Goldman Sachs cut its oil price forecasts citing higher supplies from Russia and Iran.

Comments from Iran’s supreme leader that the country was open to reviving the 2015 nuclear deal have also pulled oil lower. Should a nuclear deal be agreed upon, sanctions on Iranian oil could be lifted, with oil flooding back into the market. However, the White House denied that progress was being made in talks.

Oil markets are now looking to the Fed rate decision, where the Fed is expected to keep rates on hold after raising rates by 500 bps over the past year. Inflation is still well above the central bank’s 2% target, but surprise hikes from the RBA as the BoC last week add to the hawkish narrative.

Growing global recession fears continue to drag on the demand outlook, so central bank decisions and economic data this week will remain in focus.

Oil outlook – technical analysis

Oil remains relatively range-bound, capped on the upside by the 50 sma at 74.50 and on the downside by 67.00. The fall below 70.00 and the RSI below 50 keep sellers hopeful of a break to the downside.

Below 67.00 64.20, the 2023 low comes into play. On the upside, a break over 70.00 and 74.50 opens the door to 77.80 the May high.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.