- Toshimitsu Motegi said the BoJ should be clear about raising rates.
- Economists expect another quarter-point increase from the Bank of Japan.
- US President Joe Biden has finished campaigning for the November presidential election.
The outlook for USD/JPI remains bearish as the yen rises ahead of the Bank of Japan and Fed meetings next week. Significantly, there is more pressure on the BoJ to raise rates. At the same time, the Fed is closing in on its first interest rate cut in September.
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Senior ruling party official Toshimitsu Motegi said on Monday that the BoJ should be clear about raising rates. He also said a weak yen was hurting the economy, so Japan’s central bank should begin announcing plans to reduce its massive economic stimulus.
Economists expect the Bank of Japan to raise interest rates by another quarter of a point. However, a consensus on timing has yet to be reached. Still, policymakers could announce plans to taper bond purchases at their next meeting.
Moreover, investors are optimistic about the Fed’s upcoming rate cut, which would narrow the gap between Japan and the US. Recent economic reports have raised expectations for a cut in September, weakening the dollar significantly. The next big report is the core PCE price index, due out on Friday. If price pressures continue to ease, the dollar could weaken further.
Since last week, the yen has been in first place after the Japanese government intervened to support the currency. The intervention coincided with a softer-than-expected US CPI report, which boosted the yen.
Elsewhere, currency markets remained calm after US President Joe Biden wrapped up his campaign for the November presidential election. Trump will now compete with Kamala Harris. However, Trump is still more likely to win.
USD/JPI Key Events Today
There will be no key reports from Japan or the US today, so the pair could extend yesterday’s move.
USD/JPI Technical Outlook: Bears remain in control after retesting SMA
On the technical side, the USD/JPI price is declining after retesting the 30-SMA resistance. The bulls failed to break above the SMA, showing a strong bearish trend. This attempt came after the RSI made a bullish divergence.
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Although the bears were exhausted, they were not ready to relinquish control at the 30-SMA. As a result, the price falls. If it makes a lower low, it could retest the 155.01 level and confirm a continuation of the downtrend. Otherwise, the bulls could retest the SMA.
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