Beyond the numbers, investors should monitor FOMC Member chatter. Views on the economic outlook, inflation, and the Fed interest rate trajectory need consideration.

The FOMC projections for Core PCE inflation and the Fed Funds Rate were more hawkish despite softer US inflation figures for May. Deviations from the FOMC economic projections for inflation and the Fed Funds Rate could move the dial.

According to the CME FedWatch Tool, the chances of a September Fed interest rate hike jumped from 50.5% to 67.7% in the week ending June 14. The shift in sentiment toward a September Fed rate hike reflected the influence of the US CPI Report, which countered the more hawkish FOMC economic projections.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on US retail sales figures, inflation numbers from Japan, and preliminary Services PMIs. Disappointing numbers from the US could tilt monetary policy divergence toward the Japanese Yen. However, investors should monitor central bank chatter after the BoJ and Fed monetary policy decisions.

USD/JPY Price Action

Daily Chart

The USD/JPY sat comfortably above the 50-day and 200-day EMAs, affirming the bullish price signals.

A breakout from 158 could give the bulls a run at the 159 handle. Furthermore, a USD/JPY return to 159 could signal a move toward the April 29 high of 160.209.

Investors should consider central bank commentary, machinery tool orders from Japan, and US manufacturing sector data.

Conversely, a USD/JPY break below the 156 handle could bring the 50-day EMA into play. A fall through the 50-day EMA could signal a drop toward the 151.685 support level.

The 14-day RSI at 59.07 suggests a USD/JPY return to the April 29 high of 160.209 before entering overbought territory.