- The USD/JPY outlook shows some indecision in the market ahead of the US CPI.
- Economists are forecasting a US headline figure of 2.8%.
- Trade tensions between China and the US might increase.
The USD/JPY outlook shows some indecision in the market as traders look forward to crucial US inflation figures. Meanwhile, the uncertainty surrounding the deadline for a trade deal between the US and China looms.
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This week, the US will release its pivotal CPI report. This will show the state of inflation in the country and will shape the outlook for rate cuts. Economists are forecasting a headline figure of 2.8%, higher than the previous reading of 2.7%. Meanwhile, the monthly figure might increase by 0.2%, slower than the previous increase of 0.3%. An unexpected outcome will increase market volatility in either direction.
Meanwhile, talks between China and the US have dragged on with no clear trade deal. The August 12 deadline is nearing, and if there is still no deal, tensions between the two countries might increase. This would also increase market volatility. The yen would benefit due to its safe-haven nature.
“If I’d be playing it any way, I’d be long volatility this week,” said Tim Kelleher, head of institutional FX Sales at Commonwealth Bank in Auckland, citing the unpredictability of the looming events.
USD/JPY key events today
Neither the US nor Japan will release any high-impact reports today. Therefore, the pair might consolidate ahead of the US inflation numbers.
USD/JPY technical outlook: Bulls eye the 149.01 resistance level
On the technical side, the USD/JPY price has broken above the 30-SMA and has pulled back to retest it. The break indicates a shift in sentiment to bullish. At the same time, the RSI has gone above 50, suggesting stronger bullish momentum.
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If bulls find their footing above the SMA, the price will likely climb to retest the 149.01. A break above this level would confirm a new uptrend. On the other hand, if the price fails to make much movement above the SMA, it might drop back below to retest the 146.00 support level. A break below this support would signal a downtrend.
However, USD/JPY has lacked direction on a larger scale for some time. Instead, it has been making swings that keep chopping through the SMA. If this continues, there will be no trend in either direction.
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