USD/JPY Forecast: Dollar Remains Firm After Jobless Claims Data

• US unemployment claims data on Thursday showed a bigger-than-expected drop.

• Investors expect the Fed to lower borrowing costs by 100 bps this year.

• Economists expect US inflation to hold steady at 3.0% in July.

The USD/JPY forecast leans bullish as dollar gains continue after last week’s stronger-than-expected employment figures. Meanwhile, the yen remained vulnerable due to uncertainty about a near-term Bank of Japan rate hike. 

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The dollar edged higher as Fed rate cut expectations eased. This shift comes after unemployment claims data on Thursday showed a bigger-than-expected drop. The US labor market has been the reason behind recent market volatility. The last monthly report raised fears that the economy was experiencing a rapid slowdown. As a result, markets raised the chances of a 50 bps cut in September. 

However, as last week ended, recession fears eased as jobless claims data showed continued strength in the sector. Nevertheless, investors expect the Fed to lower borrowing costs by 100 bps this year. At the same time, policymakers have acknowledged recent signs of weakness by assuming a more dovish stance.

This week, the focus will be on the US Consumer Price Index report. Economists expect inflation to hold steady at 3.0% in July. Meanwhile, the monthly rate might increase by 0.2%. If the figures meet expectations, rate-cut bets will remain intact. On the other hand, lower or higher figures could cause a lot of volatility.

Meanwhile, the yen fell on Monday after policymaker comments last week reduced the likelihood of a near-term BoJ hike. A slower-than-expected hiking cycle might hurt the yen by keeping the US-Japan rate gap wide. 

USD/JPY key events today

It will be a slow start to the week as investors await US inflation data on Tuesday and Wednesday.

USD/JPY technical forecast: Bulls lack enthusiasm above the 30-SMA

On the technical side, the USD/JPY price trades above the 30-SMA after a recent reversal. At the same time, the RSI trades above 50, supporting bullish momentum. Bulls took charge at the 142.56 key level. However, they are yet to find their feet above the SMA. 

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Price action shows small-bodied candles, a sign of weak enthusiasm. Moreover, the price stays close to the SMA in a shallow move. If bulls regain momentum, USD/JPY will retest the 150.03 key level; otherwise, bears will trigger a decline in support to 142.56.

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