The US Dollar Index (DXY) has declined to about 103.70, while the ten-year US Treasury rates have dropped to 4.16%. The Japanese Yen also showed a positive outlook, as the recent fundamental outlook indicated a possibility of reversal of the trend.
Fed's Possible Movement With Rate Decisions
The expected Fed rate cut in September is supported by indications of development in lowering inflation and cooling labor conditions. June's recent consumer inflation figures showed a faster-than-expected slowing of price pressures. For once in more than four years, the monthly headline inflation dropped. The Unemployment Rate also went to 4.1%.
Officials of the Fed are increasingly confident that inflation will reach the 2% objective. At Monday's Economic Club of Washington, Fed Chair Jerome Powell observed that fresh inflation data has bolstered the conviction that inflation is on route to reaching the targeted rate of 2%. Nevertheless, he underlined that legislators need more confidence before considering rate reductions.
JPY Bulls Are Active From Upbeat Trade Balance
Driven by a more-than-expected drop in imports, which offset a minor dip in export numbers, Japan's Trade Balance for the year ended in June jumped to a surplus of ¥224 billion.
Japan's year-over-year exports in June increased by 5.4%, which fell short of the expected 6.4% and greatly dropped from the 13.5% gain of the last period. Though export growth slowed, imports fell to 3.2%, much below the expected 9.3% and the past 9.5%.
Looking closer, Japan's exports to the EU fell significantly by 13.4%, not offset by an 11.0% year-over-year rise in exports to the US.
USDJPY Forecast: Data To Look At
Investors in Tokyo are expecting the release of the National Consumer Price Index (CPI) report for June on Friday. The inflation figures will provide hints about whether the Bank of Japan (BoJ) will further tighten its monetary policy at its forthcoming July 31 meeting.
Japan's yearly National CPI, excluding Fresh Food, is estimated to have climbed to 2.7% from 2.5% in May.
On the other hand, the weekly unemployment claim for the US Dollar could come at 229K, which is higher than 222K in the previous week.
USDJPY Forecast Technical Analysis
In the recent chart, the USDJPY bears became active with a counter-bearish impulsive pressure. As a result, the price moved below the 157.00 level and reached near the 100-day SMA line. In that case, a bullish continuation is still possible, which might need to form a proper price action from the near-term support level.
In the volume structure, the high volume level since the beginning of 2024 is at 147.91 level, which is 5.11% below the current price. As a result, the price has more room to show a downside correction as a mean reversion to the high volume line.
Based on this outlook, investors should monitor the price action at the 155.00 to 154.50 zone as any bullish reversal from this zone could increase the price toward the 160.00 psychological level. However, the immediate downside pressure below the 154.00 level might lower the price below the 147.91 support level.
