• The USD/JPY outlook weakens as BoJ said it would continue buying government bonds at the current rate.

• The dollar was strong due to safe-haven inflows from the Eurozone.

• The US Producer Price Index report showed softer-than-expected wholesale inflation.

The USD/JPY outlook remains optimistic as the yen hovers close to a one-month low after the Bank of Japan’s surprisingly dovish stance. At the same time, the dollar was firm as investors sought safety amid political uncertainty in the Eurozone.

The Bank of Japan kept rates unchanged on Friday and said it would continue buying government bonds at the current rate. Meanwhile, market participants had expected the central bank to announce a reduction in its bond purchases. The central bank, however, said it plans to trim these purchases next month. Consequently, the yen and Japanese bond yields plunged.

Furthermore, investors expect the BoJ to raise rates sometime this year. However, there is uncertainty about the timing, given that recent data shows weak consumption in the country.

Elsewhere, the dollar was strong due to safe-haven inflows from the Eurozone. Investors have been worried since French President Emmanuel Macron announced a snap election. This led to political uncertainty, which drove traders away from risky assets.

Meanwhile, economic data throughout the week reinforced expectations that the Fed will cut rates in September. Notably, on Thursday, data revealed more cracks in the US labor market, with unemployment claims increasing from 229,000 to 242,000 in the previous week.

At the same time, the Producer Price Index report showed softer-than-expected wholesale inflation, which will likely put more pressure on the Fed to cut interest rates. The PPI fell from 0.5% in the previous month to -0.2 % in May. This came after the consumer inflation report revealed a lower-than-expected figure. Although the Fed was cautious at the policy meeting, investors expect at least two rate cuts in 2024.

USD/JPY key events today

• Prelim UoM consumer sentiment

USD/JPY technical outlook: Bulls surpass 157.50 resistance

On the technical side, the USD/JPY price has broken above the 157.50 resistance level to make a higher high. This has put the price well above the 30-SMA, and the RSI is nearer the overbought region, which supports a solid bullish bias.

At the same time, the price is trading in a bullish channel, with the current move heading for the channel resistance. However, before that, USD/JPY might retest the recently broken 157.50 level before climbing the channel resistance.

https://www.forexcrunch.com/blog/2024/06/14/usd-jpy-outlook-dovish-boj-sends-yen-to-1-month-lows/