- The yen has lost about 30 percent of its value against the dollar since 2020.
- US Treasury yields and the dollar have risen since Trump won.
- US consumer inflation rose as expected in October.
The USD/JPI outlook shows a sharp decline in the yen as the dollar moves to new highs on optimism about a Trump election victory. Meanwhile, top officials in Japan are growing concerned about the weak yen, with some calling for the BoJ to raise rates.
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According to the Bank of Japan, the yen has lost about 30% of its value against the dollar since 2020. This decline is due to low interest rates in Japan, which has created a large rate differential against the US. However, the BoJ recently moved to raise interest rates before pausing amid concerns about market volatility.
Meanwhile, US Treasury yields and the dollar have risen since Trump won the election. At the same time, Fed rate cut expectations have fallen. Therefore, the hope of a rapid narrowing of the rate gap is fading.
On Thursday, the top opposition leader said the Bank of Japan should raise rates to 1% to support the weak yen. Moreover, he added that the central bank should be vocal about its plans.
Meanwhile, data on Wednesday showed that US consumer inflation rose as expected in October. On a monthly basis, it increased by 0.2%, while on an annual basis, it increased by 2.6%. Therefore, the Fed is likely to cut borrowing costs by 25 basis points in December.
However, the prospect of a rate cut in 2025 has changed with Trump as the new president. His policies on taxes and trade are likely to be inflationary. As a result, the Fed may have to pause or cut rates more slowly than expected.
Elsewhere, the US will release wholesale and retail inflation data, which will continue to shape bets on a December Fed rate cut. Moreover, market participants will pay attention to Powell’s speech.
USD/JPI Key Events Today
- USA core PPI m/m
- US PPI m/m
- US unemployment claims
- Fed Chairman Powell is speaking
USD/JPI technical outlook: Uptrend continues above 156.02
From the technical side, USD/JPY the price reached a new high near the key level of 156.02. The price is trading well above the 30-SMA, indicating a strong bullish move. Furthermore, bullish momentum is strong, with the RSI in the overbought region.
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Initially, the price struggled to break the 154.00 resistance level. However, when it did, the bulls confirmed the continuation of the previous bull trend.
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