- The dollar strengthened as investors prepared for US PPI and CPI reports.
- There is a 50% chance that the Fed will cut in September.
- Economists expect US consumer inflation to fall to 0.3% in April from 0.4%.
USD/JPI price analysis points to the north as the dollar strengthens ahead of US inflation data. Meanwhile, the yen fell to a two-week low, sparking fears that Japanese authorities may try to prop up their currency.
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The dollar strengthened as investors prepared for US PPI and CPI reports, which will tell more about what the Fed might do going forward. Recent poor data from the US has raised bets that the Fed could cut twice this year. Namely, weaker demand in the economy could lead to lower inflation.
Furthermore, most policymakers have confirmed that the next policy move will be a rate cut. Still, the odds of a cut in September fell to 50% ahead of the inflation report. This decline comes as markets fear another upbeat report. The trend in recent months has been warmer than expected inflation figures. This time, economists expect US consumer inflation to fall to 0.3% in April from 0.4% the previous month. Before that, there will be a wholesale inflation report. Any indication that inflation remains persistent could dampen expectations of a rate cut.
Meanwhile, the yen continued to fall after the intervention, causing concern in Japan. Japanese Finance Minister Shunichi Suzuki said on Tuesday that the government will work closely with the BoJ to ensure they align their policy goals.
USD/JPI Key Events Today
- US Core PPI m/m
- US PPI m/m
- Fed President Powell is speaking
USD/JPI technical price analysis: Bulls set their target at 158.00
On the technical side, the price of USD/JPI has retraced more than 50% of its previous movement. At the same time, it broke above the resistance level of 156.00. The price has remained comfortably above the 30-SMA for some time. Although the uptrend is a bit shallow, it is hardly stopping or pulling back. This means that more can be continued.
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The next target for the USD/JPI pair is at the resistance level of 158.00. Bullish momentum is strong, with the RSI almost overbought. So there is nothing stopping the price from reaching 158.00. Only a sudden catalyst in the opposite direction could break below the SMA and reverse sentiment.
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