On Friday (June 7), the US Jobs Report came in hotter than expected, sending the USD/JPY back toward 157. The US CPI Report could force the BoJ to hold more meaningful discussions on ways to bolster the Japanese Yen.

US Economic Calendar: US CPI Report and the FOMC Projections Loom

Investors should consider the looming US CPI Report. After better-than-expected labor market data on Friday, sticky inflation figures could give the FOMC hawks a stronger case to keep interest rates steady in 2024.

Average hourly earnings increased 4.1% year-on-year in May after rising 3.9% in April. Higher wages could increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation.

A higher-for-longer Fed rate path could raise borrowing costs and reduce disposable income.

Economists expect the Fed to leave interest rates at 5.50% on Wednesday. However, hopes of a September Fed rate hike remain despite the US Jobs Report.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on the US CPI Report, the Fed, and the Bank of Japan. More hawkish FOMC economic projections could tilt monetary policy divergence toward the US dollar. However, a USD/JPY move toward 160 could incentivize the BoJ to start rate hike discussions.

USD/JPY Price Action

Daily Chart

The USD/JPY held above the 50-day and 200-day EMAs, sending bullish price trends.

A USD/JPY return to 157 could give the bulls a run at the 158 level. If the USD/JPY returns to the 158 handle, the April 29 high of 160.209 would come into play.

Bank of Japan commentary needs consideration after the Q1 2024 GDP Report.

Conversely, a USD/JPY fall through the 50-day EMA could signal a drop toward the 151.685 support level.

The 14-day RSI at 55.31 suggests a USD/JPY return to the April 29 high of 160.209 before entering overbought territory.