- Hajime Takata said there are signs the BoJ will soon reach its 2 percent inflation target.
- The yen remains among the worst performing G10 currencies against the dollar this month.
- Markets awaited the report on the core US PCE price index.
In Thursday’s USD/JPI forecast, a bearish outlook prevailed as the yen rallied following hawkish statements from the Bank of Japan. The BoJ policymaker emphasized the need to conclude the central bank’s ultra-easy monetary policy.
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Namely, Bank of Japan board member Hajime Takata said that there are signs that central banks will soon reach their 2% inflation target. As a result, the bank can finally start raising interest rates. Analysts say the BoJ could surprise markets by raising interest rates in March.
Still, the yen remains among the worst performers of the G10 against the dollar this month. In February, the dollar strengthened as upbeat economic data led to a decline in rate cut bets. Meanwhile, the yen weakened as policymakers lowered expectations from the BoJ for aggressive interest rate hikes.
On Wednesday, the dollar remained flat as markets awaited the report on the core US PCE price index. This report will guide the Fed’s next policy moves to tame inflation. Economists expect an increase of 0.4%.
Currently, expectations for a rate cut in May have fallen to 20%, while those for June are close to 50%. A higher-than-expected reading of today’s inflation report could lead to further declines in rate cut expectations. Consequently, the dollar would strengthen, putting pressure on the yen.
USD/JPI Key Events Today
- US core price index PCE m/m
- US unemployment claims
USD/JPI Technical Forecast: 150.86 Resistance prompts bearish divergence
The price made a bearish divergence on the charts after finding solid resistance at the 150.86 level. Initially, the price traded in a strong bullish trend that paused at the resistance level of 150.86. After the break, it moved sideways in a rectangle with clear support and resistance.
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However, a bearish divergence in the RSI showed that the bullish momentum is fading. As a result, there was a strong break below the 30-SMA, indicating a change in sentiment. At the same time, the RSI is approaching the oversold region, supporting a strong bearish momentum. If the price breaks out of its rectangle, the first target will be at the 0.382 Fib level. Meanwhile, another target will be at the 0.618 Fib level.
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