- Wholesale inflation in Japan increased by 3.7% annually, well above estimates of 3.4%.
- The dollar eased slightly as traders geared up for the US CPI report.
- Economists expect US inflation to increase by 0.3% in November.
The USD/JPY price analysis shows rising price pressures in Japan that will likely support a Bank of Japan rate hike in December. As a result, the yen gained on Tuesday as rate hike bets rose. Meanwhile, market participants remained cautious ahead of pivotal US inflation data.
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Data on Wednesday revealed that wholesale inflation in Japan increased by 3.7% annually, well above estimates of 3.4%. As a result, market participants increased the likelihood of a December BoJ rate hike to 27%, boosting the yen. Although the chances are still low, things might change between now and the policy meeting.
On the other hand, the dollar eased slightly as traders geared up for the US CPI report. Economists expect inflation to increase by 0.3% in November and 2.7% annually, both figures higher than the previous month’s readings. A bigger-than-expected reading on consumer inflation will lower the likelihood of a December Fed rate cut. On the other hand, softer-than-expected figures will solidify bets, weighing on the dollar.
Currently, traders are pricing an 85% chance of a rate cut in December. This followed a mixed employment report last week that showed cracks in the labor sector. However, Fed policymakers have maintained a cautious tone this week, pointing to the resilience of the US economy.
USD/JPY key events today
- US core CPI m/m
- US CPI m/m
- US CPI y/y
USD/JPY technical price analysis: Bulls stall at 152.00 resistance
On the technical side, the USD/JPY price is pulling back after meeting a strong hurdle at the 152.00 resistance level. However, the bullish bias remains intact since the price trades above the 30-SMA with the RSI above 50.
The trend recently reversed after bears failed to continue below the 149.02 support level. The RSI made a bullish divergence, indicating weakness in the downtrend. Soon after, bulls gained enough momentum to breach the 30-SMA resistance.
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Therefore, the current pullback might find support at the 30-SMA. This will likely allow bulls to return and retest the 152.00 resistance level. A break above this level will signal a continuation of the uptrend. Moreover, it will allow bulls to target the 154.00 resistance level.
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