- The USD/JPY outlook shows the yen in a stronger position as the dollar eases.
- New York Fed Chief John Williams said a rate cut is possible.
- Market participants are eagerly awaiting a key US inflation report scheduled for release on Friday.
The USD/JPY outlook indicates the yen is in a stronger position as the dollar eases amid an increase in bets for a Fed rate cut. The greenback dropped after dovish comments from a Fed policymaker. At the same time, lingering concerns persist about the Fed’s independence.
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New York Fed Chief John Williams said a rate cut is possible, showing a more dovish tone among policymakers. However, he also cautioned that it would depend on economic data. Still, his remarks weighed on the dollar and increased the likelihood of a September rate cut to 89%.
Market participants are eagerly awaiting a key inflation report scheduled for release on Friday. This will significantly impact the outlook for Fed rate cuts. At the same time, the new month will bring the crucial non-farm payrolls report. Further weakness in the labor market will raise concerns about the state of the economy. Moreover, it will push up bets for a rate cut, weighing on the dollar.
Elsewhere, traders are watching the growing conflict between Trump and the Fed. His recent attempt to fire a Fed Governor has raised concerns about the central bank’s independence. If the president gets his way, the central bank will have more dovish members who will be ready to cut borrowing costs as he wants. Such an outcome would hurt investor confidence in US financial markets.
USD/JPY key events today
- US preliminary GDP q/q
- US unemployment claims
USD/JPY technical outlook: Bearish momentum surges within consolidation
On the technical side, the USD/JPY price is trading in a sideways movement between the 148.75 resistance level and the 146.50 support level. During this time, the price has chopped through the 30-SMA, a sign that bears and bulls are almost equally matched.
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However, recent price action has shown larger red candles, indicating stronger momentum among bears. At the same time, the price trades below the 30-SMA within the range, showing bears are currently in the lead. Meanwhile, the RSI trades below 50, suggesting stronger bearish momentum. Therefore, the price might soon challenge the range support. A break below the range support would signal the end of the consolidation period. Moreover, it would strengthen the bearish bias.
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