- The dollar strengthened last week after consumer inflation data rose more than expected.
- Traders give the Fed a 91% chance of cutting borrowing costs by 25 basis points in November.
- Market participants await the US retail sales report.
The USD/JPI outlook is bullish, with the dollar firming after better-than-expected consumer inflation data. Meanwhile, the yen was weak despite Ishiba’s comments that he would not intervene in the BoJ’s policy adjustment.
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The dollar strengthened last week after consumer inflation data rose more than expected. The CPI rose 0.3% in September and completely dashed hopes for another big Fed rate cut this year. Furthermore, the inflation numbers followed the NFP report, which revealed an unexpected jump in US job growth.
Initially, policymakers took a more dovish tone amid fears that the US labor market was deteriorating. As a result, the focus has shifted to preserving growth and demand. So the US central bank implemented a 50 basis point rate cut, raising bets on more such cuts in 2024 and weighing on the dollar.
However, the dollar recovered as incoming data changed this outlook. There is currently a 91% chance that the Fed will cut borrowing costs by 25 basis points in November. Furthermore, market participants are now setting low odds for a break. The next big report will show retail sales, which could change the outlook for rate cuts.
Elsewhere, the upcoming presidential election could cause some market turmoil. Therefore, market participants may prefer to stay on the sidelines ahead of the final result.
Meanwhile, the yen fell despite Ishiba’s comments on Saturday that he would stay outside the BoJ’s price stability mandate. His earlier comments indicated that he does not support a short-term rate hike.
USD/JPI Key Events Today
It will be a slow start to the week for USD/JPI as neither the US nor Japan will release high-impact data.
USD/JPI technical outlook: Weaker bullish trend
On the technical side, the price of USD/JPI is rising after a retest of the 30-SMA support. The bullish bias is strong, with the price above the SMA. At the same time, the RSI is trading near the overbought region. However, it showed some weakness with a slight divergence.
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Moreover, the price action shows smaller candles that show exhaustion. Therefore, the bulls may not be able to break the resistance level of 150.01. Meanwhile, a break below the SMA will indicate a change in sentiment to the downside.
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