- Former Fed official Bill Dudley said there was a strong case for a 50 bps rate cut.
- The probability of a 50 bps rate cut rose from 28% to 45%.
- BoJ board member Naoki Tamura noted that the risk of inflation is rising.
The USD/JPI outlook shows the greenback in freefall as markets price in a higher probability of a super-major Fed rate cut next week. At the same time, the yen strengthened as more Bank of Japan policymakers took a hawkish tone.
–Are you interested in learning more about forex options trading? Check out our detailed guide-
On Thursday, the dollar fell to its lowest level in a year following reports that the Fed may consider cutting rates by 50 basis points at next week’s meeting. Furthermore, former Fed official Bill Dudley said there is a strong case for a 50 bps rate cut. As a result, the probability of a 50 bps rate cut increased from 28% to 45%. Data on Wednesday showed that core consumer inflation beat expectations in August. Therefore, market participants increased the probability of a rate cut by 25 basis points, boosting the dollar.
Moreover, Friday’s data revealed that wholesale inflation was higher than expected. Recent data indicate a gradual pace of rate cuts. However, reports on Friday indicated that policymakers may consider a larger cut.
Meanwhile, the yen was strong after another policymaker backed more rate hikes. BoJ board member Naoki Tamura noted that the risk of inflation is rising. Higher inflation creates the best conditions for the Bank of Japan to raise interest rates.
USD/JPI Key Events Today
Investors are not expecting any key economic reports from the US or Japan. Therefore, the pair could extend the move on Thursday.
USD/JPI Technical Outlook: Bearish momentum eases near 141.02 support
On the technical side, the price of USD/JPI is on the verge of falling below the support level of 141.02. The bias is bearish as the price has made a series of lower highs and lows, indicating a downtrend. However, the decline slowed near the key level of 141.02. It is becoming increasingly difficult for the price to make lower lows.
–Are you interested in learning more about Forex robots? Check out our detailed guide-
At the same time, the RSI made a bullish divergence, indicating a weakening of the bearish momentum. If this is the end of the road for the bears, the price could jump higher than 14.02 to challenge the 30-SMA resistance. A break above the SMA would confirm a change in sentiment. On the other hand, if the bears remain in charge, the price will remain below the SMA.
Do you want to trade Forex now? Invest in eToro!
67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing money.
