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Category: Forex News, News

USD/JPY Forecast: Tokyo Inflation, the Yen, and Bank of Japan Rate Hikes

Economists forecast the Core PCE Price Index to increase 2.8% year-on-year in April after a rise of 2.8% in March. Sticky inflation figures could impact investor expectations of a September Fed rate cut.

However, investors should consider the personal income and spending figures. Upward personal income and spending trends may fuel demand-driven inflation and a more hawkish Fed rate path.

Economists forecast personal income to increase by 0.3% in April after rising by 0.5% in March. Furthermore, economists predict personal spending to increase by 0.3% after advancing by 0.8% in March.

With the Personal Income and Outlays Report in focus, FOMC member chatter also needs consideration. Reactions to the Report and views on the Fed interest rate trajectory could influence buyer appetite for the USD/JPY.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on the Tokyo inflation numbers and the US Personal Income and Outlays Report. However, central bank commentary also needs consideration amidst shifting sentiment toward BoJ and Fed policy goals. Hotter-than-expected US inflation numbers may tilt monetary policy divergence toward the US dollar.

USD/JPY Price Action

Daily Chart

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

A USD/JPY break above the 157.5 handle could support a move toward the 160 handle. Moreover, a return to 160 could give the bulls a run at the April 29 high of 160.209.

Inflation, retail sales, and unemployment numbers from Japan need consideration before the US session.

Conversely, a USD/JPY drop below the 156 handle could give the bears a run at the 50-day EMA. A fall through the 50-day EMA could signal a drop toward the 151.685 support level.

The 14-day RSI at 57.37 suggests a USD/JPY return to the April 29 high of 160.209 before entering overbought territory.

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