- Producer prices rose 0.6%, beating estimates for a 0.3% rise.
- US retail sales missed forecasts, showing a slowdown in consumer spending.
- The yen was steady as investors awaited the final results of wage negotiations.
The USD/JPI outlook shows a bullish wave today driven by a rally in the dollar following encouraging wholesale inflation data. However, there was a slight pullback as investors took profits ahead of policy meetings in the US and Japan.
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Notably, US wholesale inflation rose more than expected in February, leading to lower rate cut expectations. Producer prices rose 0.6%, beating estimates for a 0.3% rise. This was the second inflation report in a week that showed US inflation remained high.
Other data from the US included weekly jobless claims, which fell, pointing to tough conditions in the labor market. In addition, US retail sales missed forecasts, showing a slowdown in consumer spending. Despite the mixed data, interest rate cut expectations fell as investors focused on inflation.
Next week, the Fed will meet to decide on interest rates. Markets expect the Fed to keep rates on hold. Moreover, traders will focus on what policymakers will say about the prospect of rate cuts, especially after recent inflation reports.
Meanwhile, the yen was flat on Friday as investors awaited the final results of wage talks. So far, most major companies in Japan have agreed to increase payments. Therefore, there is a good chance that the Bank of Japan will be ready to change policy next week. Such a move would greatly boost the yen.
USD/JPI Key Events Today
- Empire State Index of Production
- Preliminary attitude of UoM consumers in the US
USD/JPI technical outlook: Bulls above strong resistance
On the technical side, the USD/JPI pair broke above the key resistance level of 148.01 and the Fib level of 0.382. Furthermore, the bias is bullish as the price is trading above the 30-SMA while the RSI is above 50.
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A recent change in sentiment came when the price found support at the key 146.51 level. The bulls took control when the price broke above the 30-SMA resistance. At the moment, the price is retracing the previous bearish movement and could soon reach the 0.618 Fib level. However, the price could consolidate as the SMA catches up before continuing higher.
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