- Data on Friday showed that inflation in Tokyo fell below 2%.
- Market participants are following the upcoming elections in Japan.
- Economic data shows an increase in business activity in the US.
USD/JPI price analysis shows dim outlook for Bank of Japan rate hike after Tokyo inflation falls below 2% target. As a result, the yen remained fragile near a three-month low and headed for a fourth week of losses. Meanwhile, the dollar eased slightly with Treasury yields but hovered near recent highs.
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Data on Friday showed that inflation in Tokyo fell below the Bank of Japan’s 2 percent target, casting doubt on the prospect of a rate hike. Japan’s central bank had hoped for higher inflation and spending to support the rate hike cycle. However, weaker price pressures could cause further delays in rate hikes, weakening the yen.
At the same time, market participants are watching the upcoming elections in Japan, which could affect the BoJ’s policy plans. According to polls, the ruling party could lose its majority status, which would change the outlook for fiscal policy. Such changes could also affect future rate hike plans.
Meanwhile, the dollar remained steady against most peers ahead of the US presidential election. Despite Friday’s slight pullback, the dollar is headed for another week of gains. This week’s rise in the dollar came as market participants worried about escalating tensions in the Middle East.
At the same time, speculation about the outcome of the November elections caused fluctuations. At first, Trump had the upper hand, boosting the dollar. However, this changed after a Reuters poll found Kamala in the lead.
Elsewhere, economic data released on Thursday showed an increase in business activity in the US. Moreover, jobless claims fell more than expected. The reports supported a more gradual pace of Fed rate cuts.
USD/JPI Key Events Today
The pair could end the week on a calm note as neither the US nor Japan will release any significant reports.
USD/JPI technical price analysis: Bulls target 153.00
From the technical side, USD/JPY the price pulled back after meeting solid resistance at the psychological level of 153.00. Still, the bulls remain in the lead despite the decline. The price is trading above the 30-SMA and the RSI is in bullish territory. Therefore, the price has the potential to increase.
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A bounce near the 30-SMA will allow the bulls to challenge the 153.00 level for a new high. A break above will signal a continuation of the bullish trend.
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