US Dollar Outlook: USD/JPY
USD/JPY falls to a fresh weekly low (146.85) after struggling to test the monthly high (148.81), and data prints coming out of the US may drag on the exchange rate as the Personal Consumption Expenditure (PCE) Price Index is anticipated to show slowing inflation.
US Dollar Forecast: USD/JPY Falls amid Struggle to Test Monthly High
Keep in mind, USD/JPY cleared the December high (148.35) after showing a limited reaction to the negative slope the 50-Day SMA (145.93), and the exchange rate may attempt to retrace the decline from the 2023 high (151.91) as the Bank of Japan (BoJ) sticks to Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control (YCC).
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As a result, speculation surrounding US monetary policy may influence USD/JPY over the coming days as the Federal Reserve appears to be at the end of its hiking-cycle, and the Federal Open Market Committee (FOMC) may continue to prepare households and businesses for a less restrictive policy as Fed officials forecast lower interest rates in 2024.
US Economic Calendar
In turn, another slowdown in the core PCE, the Fed’s preferred gauge for inflation, may generate a bearish reaction in the Greenback as it raises the central bank’s scope to implement a rate cut sooner rather than later, but a stronger-than-expected print may curb the recent weakness in USD/JPY as it puts pressure on Chairman Jerome Powell and Co. to keep US interest rates higher for longer.
With that said, USD/JPY may face increased volatility ahead of the FOMC rate decision on January 31 as it falls to a fresh weekly low (146.85), but the exchange rate may attempt to retrace the decline from the 2023 high (151.91) amid the lack of response to the negative slope in the 50-Day SMA (145.93).
USD/JPY Price Chart – Daily
Chart Prepared by David Song, Strategist; USD/JPY on TradingView
- USD/JPY seems to be under pressure after struggling to test the monthly high (148.81), with a break/close below the 145.90 (50% Fibonacci extension) to 146.70 (78.6% Fibonacci retracement) region raising the scope for a move towards the 141.50 (38.2% Fibonacci extension) to 142.50 (61.8% Fibonacci retracement) area.
- Next area of interest comes in around the monthly low (140.82), but USD/JPY may track the January range amid the limited reaction to the negative slope the 50-Day SMA (145.93).
- Failure to push below the 145.90 (50% Fibonacci extension) to 146.70 (78.6% Fibonacci retracement) region may lead to further tests of the monthly high (148.81), with a break/close above the 149.40 (100% Fibonacci extension) to 150.30 (61.8% Fibonacci extension) area opening up the 2023 high (151.91).
Additional Market Outlooks:
US Dollar Forecast: AUD/USD Rebound Eyes Test of 50-Day SMA
US Dollar Forecast: GBP/USD Rebounds from 50-Day SMA
--- Written by David Song, Strategist
Follow on Twitter at @DavidJSong
