- The US will release data on consumer inflation on Wednesday.
- Economists expect the CPI to rise by 0.2%.
- Minutes from the Bank of Japan’s policy meeting revealed uncertainty over the next hike.
The USD/JPI forecast improved on Monday as the greenback rose ahead of key US inflation data for the week. Meanwhile, the yen weakened after minutes from the Bank of Japan’s policy meeting revealed uncertainty over the timing of the next rate hike.
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The US will release consumer inflation data on Wednesday and wholesale inflation data on Thursday. These reports will significantly shape the outlook for future Fed rate cuts. Economists expect the CPI to rise by 0.2%, at the same level compared to the previous month.
A larger-than-expected increase would reduce the likelihood of a Fed rate cut in December. On the other hand, if inflation is in line with expectations or milder, the US central bank is likely to cut rates again in December. Meanwhile, market participants will also be watching Friday’s retail sales report for clues on consumer spending.
Markets expect the Fed to cut rates again in December. However, since Trump won the presidential election, bets on a 2025 rate cut have fallen. Traders estimate the likelihood that Trump’s policies will lead to an increase in inflation. Therefore, the Fed may be forced to cut rates at a slower pace or to pause and reverse.
Meanwhile, the yen eased on Monday after minutes from the BoJ meeting revealed that policymakers were uncertain about the timing of the next rate hike. Still, the currency rallied last week when Trump won, and top officials warned markets against a sharp fall in the yen. A Trump presidency means the dollar is likely to rise. As a result, the yen could suffer, prompting the Bank of Japan to raise rates.
USD/JPI Key Events Today
Market participants today do not expect high-impact reports. Therefore, they will continue to digest the minutes of the BoJ.
USD/JPI Technical Forecast: Bulls struggle to break through resistance at 153.75
From the technical side, USD/JPY the price is climbing and is challenging the resistance level of 153.75. At the same time, on a larger scale, it is trading in a bullish channel with clear support and resistance lines. Bears have recently pushed the price around channel support, where bulls have taken control.
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Currently, the price is trading above the 30-SMA, with the RSI in bullish territory. Therefore, a solid bullish bias is likely to lead to a break above 153.75. This will allow USD/JPI to reach the critical psychological level of 155.00.
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