USD/JPY has dropped five days in a row, and reached a new low on Friday of 151.42, the lowest since December 11, 2011. The rate has fallen by more than 4.7% since its peak this year, as traders are focusing on Federal Reserve and Bank of Japan action. What’s next for USD/JPY?
US job data and inflation Report
After the US released the nonfarm payroll report for January, the USD/JPY rate fell.
The Bureau of Labor Statistics reported that the economy created 143k new jobs in January, after 307k were added in the preceding month. This figure is lower than median estimates of 170k.
A second set of data revealed that the rate had dropped from 4,1% to 4,0% for the 2nd consecutive month. It was noteworthy because it showed that the unemployment rate was heading towards 4%.
The Federal Reserve had left the interest rate unchanged a week earlier and indicated that they would keep them at their current level. Analysts anticipate the bank will start cutting rates at the meeting in July.
Fed is most concerned that US inflation remains high. The headline CPI increased to 2.9% while the core CPI fell to 3.2%.
This week, the US will publish consumer inflation figures that impact the USD/JPY currency pair. Analysts expect the headline CPI to be down 0.4% from the 0.4% of the prior month. This will result in a YoY of 2,9% which is much higher than what the Fed had set as its target.
The core inflation rate, which excludes volatile energy and food prices, is expected to rise from 0.2% up to 0.3%. On a year-over-year basis, it will stay at 3.2%.
Donald Trump’s implementation of import tariffs may lead to higher US inflation. China imports have been subject to a tariff of 10%, and Mexico and Canada are now charged a 25% tax.
The Fed could decide to keep interest rates higher. Jerome Powell will be speaking this week and could have an impact on the USD/JPY.
BoJ Rate Hikes
After the Bank of Japan’s last meeting, it maintained its hawkish position.
In contrast to the Fed, which is cutting interest rates, the BoJ raised rates at its last meeting on monetary policy. The BoJ raised interest rates in its last monetary policy meeting from 0.25% up to 0.50%. Officials said that the trend could continue as inflation is high.
Recent economic data revealed that Consumer Price Index headline rose to the highest levels since 2023, from 2,9% in November. The Consumer Price Index (CPI) has increased in each of the last two months.
The USD/JPY has fallen because economists think that BoJ is going to deliver further hikes this year.
USD/JPY Technical Analysis
USDJPY Chart by TradingView
On the daily chart, the USD/JPY rate has fallen to 152 due to the divergence between the Fed and BoJ. The rate has fallen below the upper trading range of Murrey Math Lines, which is 151.56.
USD/JPY has fallen below both the 100-day and 50-day Moving Averages. Both lines are on the verge of crossing each other. This is a confirmation that this pair will continue to fall.
Both the Percentage Price Oscillator and Relative Strength Index have pointed down. The pair is likely to continue dropping as the sellers aim for the lowest point of the range, which is 148.60.
The post USD/JPY Forecast: Here’s Why the Japanese Yen Is Soaring could be updated as new information becomes available
This site is for entertainment only. Click here to read more
