• The dollar strengthened as investors prepared for the US PPI and CPI reports.

• There is a 50% probability of a Fed cut in September.

• Economists expect US consumer inflation to drop to 0.3% in April from 0.4%.

The USD/JPY price analysis points northward as the dollar strengthens ahead of US inflation data. Meanwhile, the yen fell to a two-week low, raising fears that Japanese authorities might try to support their currency.

The dollar strengthened as investors prepared for the US PPI and CPI reports, which will tell more on what the Fed might do in the future. Recent poor data from the US has raised bets that there might be two Fed cuts this year. Notably, weaker demand in the economy could lead to lower inflation.

Furthermore, most policymakers have confirmed that the next policy move will be a rate cut. Still, the chances of a cut in September have fallen to 50% ahead of the inflation report. This decline comes because markets fear another upbeat report. The trend in recent months has been hotter than expected inflation figures. This time, economists expect the US consumer inflation to drop to 0.3% in April from 0.4% the previous month. Before this, there will be the wholesale inflation report. Any indications that inflation remains persistent could send rate-cut expectations lower.

Meanwhile, the yen continued its post-intervention slide, raising concerns in Japan. On Tuesday, Japan’s Finance Minister Shunichi Suzuki said that the government will work closely with the BoJ to ensure they align their policy objectives.

USD/JPY key events today

• US Core PPI m/m
• US PPI m/m
• Fed Chair Powell Speaks

USD/JPY technical price analysis: Bulls set their sights on 158.00

On the technical side, the USD/JPY price has retraced more than 50% of its previous move. At the same time, it has broken above the 156.00 resistance level. The price has stayed comfortably above the 30-SMA for some time. Although the uptrend is a bit shallow, it barely pauses or pulls back. This means it might continue higher.

The next target for the USD/JPY pair is at the 158.00 resistance level. Bullish momentum is strong, with the RSI nearly overbought. Therefore, nothing is stopping the price from reaching 158.00. Only a sudden catalyst in the opposite direction could break below the SMA and reverse the sentiment.

https://www.forexcrunch.com/blog/2024/05/14/usd-jpy-price-analysis-yen-slips-to-2-week-low-before-inflation/