US Dollar Outlook: USD/JPY
USD/JPY pulls back from a fresh weekly high (148.52) as the US Consumer Price Index (CPI) unexpectedly holds steady at 2.7% in July, but the exchange rate may attempt to retrace the decline from the monthly high (150.92) should it extend the recent series of higher highs and lows.
USD/JPY Pulls Back from Fresh Weekly High as US CPI Holds Steady
Keep in mind, USD/JPY failed to test the March high (151.31) at the start of the month, and the recent recovery in the exchange rate may turn out to be temporary as data prints coming out of the US fuel speculation for an imminent Federal Reserve rate-cut.
In turn, the US Dollar may face additional headwinds ahead of the next interest rate decision on September 17 as the Fed appears to be on track to further unwind its restrictive policy, and more of the same from Chairman Jerome Powell and Co. may drag on the Greenback as the central bank ‘projects that the appropriate level of the federal funds rate will be 3.9 percent at the end of this year.’
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However, the Federal Open Market Committee (FOMC) may keep US interest rates higher for longer as the core CPI widens to 3.1% from 2.9% per annum in June, and Fed officials may adjust the forward guidance for monetary policy as the economy shows little signs of a recession.
With that said, swings in the carry trade may sway USD/JPY as the Fed continues to combat inflation, but the exchange rate may struggle to retain the rebound from the monthly low (146.62) if it fails to defend the bullish price series carried over from last week.
USD/JPY Price Chart – Daily
Chart Prepared by David Song, Senior Strategist; USD/JPY on TradingView
- USD/JPY carves a series of higher highs and lows as it extends the advance from the start of the week, and a move/close above 148.70 (38.2% Fibonacci retracement) may push the exchange rate toward 150.30 (61.8% Fibonacci extension).
- A breach of the monthly high (150.92) opens up the March high (151.31), with the next area of interest coming in around 151.60 (61.8% Fibonacci retracement).
- However, lack of momentum to hold above 147.10 (38.2% Fibonacci retracement) may push USD/JPY back toward the monthly low (146.62), with a move/close below 145.90 (50% Fibonacci extension) bringing the 144.40 (23.6% Fibonacci retracement) to 144.60 (50% Fibonacci extension) region on the radar.
Additional Market Outlooks
Canadian Dollar Forecast: USD/CAD Bounces Back Ahead of 50 Day SMA
US Dollar Forecast: EUR/USD Climbs to Fresh Weekly High
British Pound Forecast: GBP/USD Rebound Persists Ahead of BoE
USD/CHF Struggles as More Fed Officials Prepare to Adjust Policy
--- Written by David Song, Senior Strategist
Follow on Twitter at @DavidJSong
