- The Japanese yen is on track for its most successful week since January.
- The Bank of Japan faces a dilemma as the possibility of sustained inflation increases.
- Data on Thursday revealed minimal growth in US producer prices in June.
Today’s USD/JPY outlook is bearish. Despite pulling back slightly, the Japanese yen is on track for its most successful week against the dollar since January.
Meanwhile, the Bank of Japan faces a dilemma as the possibility of sustained inflation increases. Consequently, it raises the argument for an early adjustment to its yield control policy. However, Governor Kazuo Ueda has restated that he will “patiently” maintain substantial stimulus. The first test will occur during the central bank’s policy meeting on July 27-28, where it is likely to raise its inflation forecasts. Furthermore, it might indicate confidence in the emergence of demand-driven price increases supported by wage growth.
Elsewhere, the dollar remained near 15-month lows and was heading towards its worst week since November. Market speculation grew that the Federal Reserve was nearing the end of its rate hike cycle due to easing inflation.
Notably, data from Thursday revealed minimal growth in US producer prices in June, with the annual increase being the smallest in almost three years. This followed modest consumer price increases last month. Despite these trends, markets still anticipate a 25 basis point rate hike from the Fed later this month. However, no further hikes are expected for the remainder of the year.
Furthermore, Thursday’s data unexpectedly showed a decrease in the number of Americans filing new claims for unemployment benefits. This indicated that the labor market remains tight despite a slowdown in job growth.
USD/JPY key events today
Investors are not awaiting any key economic reports from the US or Japan. Therefore, it might be a quiet session for USD/JPY.
USD/JPY technical outlook: Bulls reemerge at 137.54 support.
USD/JPY has finally paused after an impressive decline. For the first time in a while, bulls have shown some strength at the 137.54 support level. However, the bearish bias remains intact because the price trades below the 30-SMA. At the same time, the RSI sits well below 50, supporting bearish momentum.
If the pullback continues, bulls might retest the key 140.00 resistance or the 30-SMA before bears return. However, if it is a short pause, the price will soon cross below 137.54.
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