Key events today:

13:45 UTC: USD – Composite PMI Index.

The Japanese yen (JPY) declined during the Asian session on Friday amid some repositioning ahead of the anticipated Bank of Japan (BoJ) decision. However, the yen’s drop appears tempered by growing expectations that the BoJ might raise interest rates amid signs of mounting inflationary pressures in Japan. In fact, government data released today showed that Japan’s core consumer prices rose at the fastest pace in 16 months. Moreover, the core index, which excludes fresh food and energy prices, has remained above the BoJ’s 2% annual target for the fourth consecutive month.

Meanwhile, prospects of further tightening by the Bank of Japan and bets that the Federal Reserve (Fed) will cut interest rates twice this year could narrow the rate differential between the US and Japan. Additionally, concerns about US President Donald Trump’s trade policies should continue to act as a tailwind for the yen. The US dollar (USD), on the other hand, remains near a monthly low amid fears over the implications of the Fed-Trump policy clash for interest rates. This, in turn, favors USD bears and could help limit significant gains in the USD/JPY pair.

Recommendation: Primarily trade with Sell orders at the current price level.