- The dollar rallied briefly on Monday after the assassination attempt on Trump.
- US inflation unexpectedly fell for the first time in June.
- Data on Friday revealed that inflation expectations rose in Japan.
The USD/JPI forecast is bearish as the yen remains near a four-week high following indications that the Bank of Japan intervened in markets on Thursday. Meanwhile, the dollar rallied briefly on Monday as the assassination attempt on Trump boosted the odds of his victory.
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The dollar rose as the probability of a Trump victory increased after the assassination attempt. A Trump victory would mean higher tariffs and looser fiscal policy. Furthermore, earnings prospects could improve. However, that was not enough to reverse last week’s moves following the US consumer inflation report.
Inflation unexpectedly fell for the first time in June, which surprised economists who had expected mild growth. The annual figure also came close to the U.S. central bank’s target, rising by a smaller-than-expected 3.0%. Consequently, expectations of a rate cut by the Fed have increased. The probability of a reduction in September increased to 94% from 73%.
Moreover, the yen rose after the CPI report, with Friday’s data showing that the Bank of Japan intervened in markets. Notably, the BoJ used over 3.37 trillion yen to buy the currency on Thursday. However, top officials kept quiet about the intervention.
Elsewhere, data on Friday revealed that inflation expectations rose in Japan. 90 percent of households expect price increases in a year. This could encourage the Bank of Japan to continue raising interest rates. The prospect of Fed tapering and BoJ tapering favors the yen.
USD/JPI Key Events Today
- Empire State Manufacturing Index
- Fed President Powell is speaking
USD/JPI Technical Forecast: Solid bearish momentum weakens the 158.01 barrier
On the technical side, the price of USD/JPI is trading well below the 30-SMA, indicating a steep bearish movement. Bears took control with a solid bearish candle that broke below the 30-SMA and the key 160.50 level. The decline was paused at the support level of 158.01. Bulls emerged here but were not strong enough to retest the 30-SMA.
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As a result, bears are on the verge of breaking below 158.01. If they succeed, the next hurdle will be at the 156.01 level. On the other hand, if they fail, the price is likely to climb to retest the 30-SMA before the downtrend resumes.
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