However, retail sales figures could also influence the Fed rate path. Weaker-than-expected retail sales figures could signal a softer inflation outlook and reduce the chances of a Fed rate hike. Economists forecast retail sales to increase by 0.4% in April after rising by 0.7% in March.

With inflation and retail sales in focus, FOMC member commentary also needs consideration. FOMC members Neel Kashkari and Michelle Bowman are on the calendar to speak. Reactions to the US data and views on the Fed rate path warrant investor attention.

Short-term Forecast

Near-term trends for the USD/JPY will hinge on the US CPI Report and FOMC member commentary. A hotter-than-expected US CPI Report could reduce investor bets on a September Fed rate cut and tilt monetary policy divergence toward the US dollar. However, US retail sales figures and intervention chatter to bolster the Yen will also influence the USD/JPY pair.

USD/JPY Price Action

Daily Chart

The USD/JPY remained well above the 50-day and 200-day EMAs, confirming the bullish price trends.

A breakout from the 156.5 handle could signal a USD/JPY move toward the 158 level. A USD/JPY return to 158 could give the bulls a run at the April 29 high of 160.209.

On Wednesday, the BoJ, the Japanese government, US economic indicators, and the Fed need consideration.

Alternatively, a USD/JPY drop below 155.5 would bring the 50-day EMA into play. A break below the 50-day EMA could give the bears a run at the 151.685 support level.

The 14-day RSI at 60.65 indicates a USD/JPY move to the 160 handle before entering overbought territory.