Title: USD/JPY Momentum Gathers Strength Before Key U.S. Data Releases
Original Author: EconoTimes
Published on: EconoTimes.com
As the financial markets brace for key U.S. economic data releases, the USD/JPY currency pair has been exhibiting strengthened bullish momentum. This trend is underpinned by both fundamental drivers and technical patterns, placing the focus squarely on upcoming macroeconomic indicators that could further influence this currency pair in the near term.
The USD/JPY pair, which has been in an uptrend over the last several sessions, is now trading above the 154.00 mark. Investors are calibrating their expectations ahead of critical reports such as the U.S. Consumer Price Index (CPI), Retail Sales figures, and the Federal Reserve’s anticipated policy updates. These elements are converging in a way that could dictate the next pivotal move for this major currency pair.
Key Drivers Behind USD/JPY’s Momentum
The recent surge in USD/JPY can be traced to a combination of divergent monetary policy expectations, sustained U.S. economic strength, and yields on government bonds rising. Here’s a more detailed breakdown:
• Diverging Monetary Policies:
– The U.S. Federal Reserve remains cautious about cutting interest rates despite some improvements in inflation.
– In contrast, the Bank of Japan (BoJ) has maintained ultra-loose monetary policy for an extended period, fueling the carry trade.
– This divergence continues to support the USD over the JPY, augmenting pair strength.
• U.S. Treasury Yields:
– Treasury yields have remained elevated with the 10-year yield hovering near multi-month highs.
– Higher yields make the U.S. dollar more attractive, leading to a stronger USD/JPY.
• Economic Data:
– Previous strong labor market data from the U.S., including non-farm payroll numbers, have painted a resilient picture of the economy.
– Consumer spending and price pressures are still evident, leading investors to revise their rate cut expectations downward.
– Anticipation around upcoming inflation data continues to hold the market’s attention.
Key Events to Watch
Over the next few sessions, a series of economic releases and central bank commentary are expected to play a crucial role in defining the USD/JPY trajectory. Among the key events:
• U.S. Consumer Price Index (CPI):
– Analysts forecast a 0.3% month-over-month rise in core CPI.
– Annualized core CPI is expected to remain above the Fed’s comfort threshold.
– Higher-than-expected inflation figures could prompt another spike in USD/JPY as market players reassess Fed policy action.
• U.S. Retail Sales:
– Expected to reflect the strength of consumer demand, a hotspot amid inflationary pressures.
– Strong retail sales could reinforce the view that the Fed may delay any rate cuts until later in 2024.
• Federal Reserve Communications:
– Comments from policymakers like Fed Chair Jerome Powell and others will be scrutinized for any shift in the Fed narrative on inflation and growth.
– A hawkish tone may continue to support the dollar while undermining the yen.
• Japanese Economic Activity:
– Recent data showed mixed signals from the Japanese economy, with industrial production softening and inflation staying well below target.
– Unless the BoJ delivers a surprise tightening move—highly unlikely—it’s expected to maintain its accommodative stance, providing further lift to USD/JPY.
Technical Analysis: Bullish Signs Strengthen
From a technical standpoint, the USD/JPY chart remains tilted in favor of the bulls. Several indicators are suggesting that upside momentum remains firm:
• Price Action:
– The pair is holding above the 154.00 psychological level, marking a key short-term support.
– Previous resistance levels around 153.50 have now turned into support, reinforcing the trend.
• Moving Averages:
– The 21-day and 50-day exponential moving averages are trending upwards
Explore this further here: USD/JPY trading.