Home USD/JPY Forecast: 144 Hit Amid Policy Divergence, Eying US CPI

USD/JPY Forecast: 144 Hit Amid Policy Divergence, Eying US CPI

  • Investors are anticipating crucial US inflation data.
  • Traders believe the Federal Reserve has concluded its rate hikes.
  • Japan’s core inflation likely moderated in July, affected by softer commodity prices.

Today’s USD/JPY forecast is bullish. On Thursday, the dollar surged to a one-month peak above 144 yen as investors focused on the divergence in monetary policies. Moreover, they were anticipating crucial US inflation data, which would guide the trajectory of interest rates. 

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Notably, the dollar climbed to 144.08 yen, marking its first occurrence since July 7. While the BOJ hesitates to withdraw stimulus, most traders believe the Fed has concluded its rate hikes.

Additionally, Japan’s currency faced pressure from a surge in crude oil prices, reaching its highest point since January. Given Japan’s status as a significant oil importer, this increase in energy costs influenced the yen negatively. 

Tony Sycamore, an analyst at IG, stated, “The yen has been impacted by the persistent increase in energy prices over nearly seven weeks.” Furthermore, he noted that if the US dollar’s strength continued after the inflation) release, a breach above 145 yen could lead to 148 yen.

The Bank of Japan recently decided to ease its control over long-term yields. However, policymakers emphasized that the modification was a technical adjustment to prolong the effectiveness of stimulus measures. 

Meanwhile, a Reuters poll of analysts suggested that Japan’s core inflation likely moderated in July, affected by softer commodity prices. Nevertheless, the indicator will likely remain above the central bank’s 2% target for the 16th consecutive month.

USD/JPY key events today

Investors eagerly expect the US inflation report, which will likely cause a lot of volatility for the pair. Moreover, the US will release the initial jobless claims report.

USD/JPY technical forecast: Bulls encounter a formidable barrier at 144.01.

USD/JPY technical forecast
USD/JPY 4-hour chart

On the charts, USD/JPY has risen to the 144.01 resistance level. This move saw the price move farther above the 30-SMA while the RSI got closer to being overbought. This indicates a stronger bullish bias. 

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However, now bulls are facing a solid resistance level. The price might pause or retreat at this level before breaking above and making new highs. Still, there is a chance bears might resurface with more strength than bulls. That would likely see the price break below the 30-SMA to retest at 140.01.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.