- The yen strengthened after Shigeru Ishiba won the Japanese election.
- Ishiba supports the Bank of Japan’s recent policy moves.
- The dollar fell due to softer than expected inflation numbers.
The weekly USD/JPI forecast tilts south due to the increased likelihood of more rate hikes in Japan and cuts in the US.
USD/JPI ups and downs
The USD/JPY pair had a bearish week as the yen strengthened after the Japanese election. Meanwhile, the dollar fluctuated on mixed economic data. Difficult elections for the post of prime minister in Japan ended with the victory of former defense minister Shigeru Ishiba. The yen strengthened after the results as Ishiba supports the Bank of Japan’s recent policy moves. Therefore, analysts believe that there will be more interest rate hikes under his leadership.
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Meanwhile, the dollar initially had a solid start to the week as data showed steady business activity and a drop in jobless claims. However, it finished weak due to softer-than-expected inflation numbers.
Next week’s key events for USD/JPI
All eyes will be on US economic data next week, with none expected from Japan. The US will release data on manufacturing business activity and employment. In addition, Fed Chairman Powell’s speech could contain hints about future rate cuts.
After the FOMC’s recent policy meeting, policymakers took a more dovish tone, implying more rate cuts ahead. So there is a chance that Powell will continue this trend, putting pressure on the dollar.
Furthermore, the monthly employment report will show the state of job growth and unemployment. Economists expect 144,000 new jobs in the economy, which is a slight increase compared to the previous reading. Meanwhile, the unemployment rate could remain stable at 4.2%.
USD/JPI Weekly Technical Forecast: Bears Break 22-SMA
On the technical side, the USD/JPI price is in a bearish trend as the price is trading below the 22-SMA, with the RSI in bearish territory. However, price action is showing weakness in the downtrend. The price is trading near the SMA and has broken the line several times. This is a sign that the bulls are getting stronger.
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Meanwhile, the bears are weakening, as seen in the RSI, which has made a bullish divergence. Therefore, if the price fails to break below the 141.01 support in the coming week, it could break above the SMA. Such a break would indicate a change in sentiment, allowing the price to climb to the resistance level of 149.57.
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