- Japan announced a new prime minister on Friday after a close race.
- Japan’s new Prime Minister Ishiba supports current monetary policy moves.
- Inflation in the US rose by 0.1%, which was less than the forecast of 0.2%.
USD/JPI price analysis supports further declines as the yen rises after Japan’s former defense minister, Shigeru Ishiba, won the slot to become the next prime minister. Meanwhile, cooler-than-expected US inflation data weighed on the dollar.
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Japan announced a new prime minister on Friday after a close race. The outcome boosted the yen as Ishiba supports current monetary policy moves. It could therefore continue to support the Bank of Japan as it raises borrowing costs.
Although the last meeting was somewhat cautious, economists expect at least one BoJ rate hike before the end of the year. Higher borrowing costs narrow the rate gap between Japan and the US.
Elsewhere, market focus remained on the US core PCE report. The Federal Reserve recently cut interest rates by a whopping 50 basis points. It was a clear indication of confidence that inflation is under control. Therefore, policymakers expect price pressures to continue to decline until the target.
Consequently, the unexpected figure could change the outlook for future moves. There is currently a 50% chance of another big cut in November. Data on Friday showed inflation rose 0.1%, less than the forecast of 0.2%. Therefore, the Fed has every reason to continue reducing borrowing costs.
Furthermore, a soft landing is more likely as the economy remains resilient. Data on Thursday showed US jobless claims fell to 218,000, compared with expectations of 225,000. Another report found that corporate profits increased faster than expected.
USD/JPI Key Events Today
- Core price index US PCE m/m
USD/JPI Technical Price Analysis: Swallowing Bearish Candle Signals Reversal
On the technical side, the price of USD/JPI broke out of its bullish channel with a bearish engulfing candle. At the same time, the price broke below the 30-SMA, indicating a change in sentiment. Meanwhile, the RSI fell below 50, into bearish territory.
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However, the decline has reached the support level of 143.01 and could stop here before continuing lower. The pause could allow the price to retest the channel’s recently broken support. If the bears remain in control, the price is likely to break below the 143.01 support to retest the 141.01 level.
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