- The Japanese government has lowered this year’s growth estimates.
- A Reuters poll on Friday suggested the BoJ would hold off on a July hike.
- Core inflation in Japan accelerated in June.
The USD/JPI price analysis is slightly bullish as the yen retreats from its recent highs amid signs that the BoJ may not raise interest rates in July. Meanwhile, the dollar was steady despite poor US data. The yen retreated from its highs on Wednesday after a series of interventions by the Bank of Japan to support the currency.
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However, the focus is now on the outlook for monetary policy in the US and Japan. It is significant that the Japanese government lowered this year’s growth estimates. This comes from a recent drop in demand amid higher import costs from the weak yen. The government reduced growth from 1.3% to 0.9%. A weak economy complicates Japan’s rate hike prospects, as higher borrowing costs could further hurt the economy.
Meanwhile, a Reuters poll on Friday suggested the BoJ would hold back on a July hike to support weak economic demand. This is bearish for the yen as the gap between Japan and the US will remain longer. However, economists also believe that the central bank will reduce its bond purchases. At the same time, most are planning the next rate hike in October.
There was some positive news for the yen as core inflation in Japan accelerated in June, keeping hopes alive. The country’s core CPI rose 2.6%, slightly below forecasts for a 2.7% rise. Still, it was better than the 2.5% increase reported in May.
On the other hand, the US dollar was stable despite data showing weakness in the US labor market. Jobless claims rose to 243,000, beating forecasts for 230,000.
USD/JPI Key Events Today
Investors are not expecting strong reports from the US or Japan today, which means the pair could consolidate.
USD/JPI price technical analysis: Price retests 30-SMA after bullish RSI divergence
On the technical side, the USD/JPI price pulled back after reaching the key support level of 156.00. It found solid resistance at the 30-SMA. It is noticeable that the price is in a developed downward trend with consistent lower ups and downs.
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However, the RSI is making more lows, indicating a bullish divergence with price. Therefore, there is a chance that the bulls will break above the 30-SMA to retest the resistance at 159.00. However, if the bears continue to control, the price will make a lower low below 156.00.
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