• US retail sales beat forecasts, rising 0.7% in March.

• Fed officials became more cautious about the timing of rate cuts.

• Ueda said the BoJ would hike rates if yen weakness leads to high inflation.

The USD/JPY weekly forecast charts a bullish course, fueled by positive US data and fading expectations for Fed rate cuts.

Ups and downs of USD/JPY

The USD/JPY pair had a bullish week characterized by dollar strength. The dollar had another strong week as rate cut expectations fell on upbeat data and hawkish Fed remarks. Notably, US retail sales beat forecasts, rising 0.7% in March. This followed the hot inflation and jobs figures, indicating a robust economy. As a result, Fed officials became more cautious about the timing of rate cuts. Powell avoided giving guidance, noting the high rates might stay longer.

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Meanwhile, Japanese authorities continued their verbal warnings against the yen’s decline. Ueda even said the BoJ would hike rates if yen weakness leads to higher inflation. Notably, the yen briefly strengthened on Friday due to safe-haven demand amid escalating Middle East tensions.

Next week’s key events for USD/JPY

Next week, the US will release data on durable goods and economic growth. At the same time, investors will focus on the Bank of Japan monetary policy meeting. The core durable goods orders from the US will show the state of demand in the economy, which impacts the Fed’s rate cut outlook. High demand will keep the Fed cautious about cutting rates too soon. Moreover, the GDP report will show whether the economy has expanded. Given the economy’s resilience, there is a high chance the figures will be positive.

Finally, traders eagerly await the BoJ policy meeting after Kazuo Ueda signaled a possible rate hike.

USD/JPY weekly technical forecast: Bulls target 156.00 level, channel resistance

On the technical side, the USD/JPY price is rising steeply after breaking above the 152.00 key level. The price was caught in a tight consolidation below this level for a long time. However, bullish momentum surged when it finally broke above.

At the same time, the price is approaching the resistance line of its bullish channel, where it might reverse. This could mean retesting the 156.00 critical resistance level. However, the RSI is in overbought territory, indicating near-maximum bullish momentum. If bulls get exhausted soon, the price might reverse, break below the 22-SMA and target the channel’s support line.

https://www.forexcrunch.com/blog/2024/04/21/usd-jpy-weekly-forecast-dollar-bid-amid-hawkish-fed/