• The dollar recovered briefly on Monday after Trump’s assassination attempt.

• US inflation unexpectedly fell for the first time in June.

• Data on Friday revealed that inflation expectations in Japan have risen.

The USD/JPY forecast is pessimistic as the yen remains close to a four-week peak following indications that the Bank of Japan intervened in the markets on Thursday. Meanwhile, the dollar recovered briefly on Monday as Trump’s assassination attempt raised the chances of his victory.

The dollar edged higher as the likelihood of a Trump win increased after an attempt at his life. A Trump win would mean higher tariffs and looser fiscal policy. Moreover, the earnings outlook could improve. However, this was not enough to reverse last week’s moves after the US consumer inflation report.

Inflation unexpectedly fell for the first time in June, surprising economists who had expected a slight increase. The annual figure also moved closer to the US central bank’s target, increasing by a smaller-than-expected 3.0%. Consequently, there was an increase in Fed rate cut expectations. The likelihood of a cut in September rose to 94% from 73%.

Furthermore, the yen surged after the CPI report, with data on Friday showing that the Bank of Japan intervened in the markets. Notably, the BoJ used over 3.37 trillion yen to buy the currency on Thursday. However, top officials kept quiet about the intervention.

Elsewhere, data on Friday revealed that inflation expectations in Japan have risen. 90% of households expect an increase in prices a year from now. This could encourage the Bank of Japan to continue hiking interest rates. The prospect of cuts by the Fed and hikes by the BoJ benefit the yen.

USD/JPY key events today

• Empire State Manufacturing Index
• Fed Chair Powell Speaks

USD/JPY technical forecast: Solid bearish momentum weakens 158.01 barrier

On the technical side, the USD/JPY price trades well below the 30-SMA, indicating a steep bearish move. Bears took control with a solid bear candle that broke below the 30-SMA and the 160.50 key level. The decline paused at the 158.01 support level. Here, bulls emerged but were not strong enough to retest the 30-SMA.

As a result, bears are on the verge of breaking below 158.01. If they succeed, the next hurdle will be at the 156.01 level. On the other hand, if they fail, the price will likely climb to retest the 30-SMA before the downtrend continues.

https://www.forexcrunch.com/blog/2024/07/15/usd-jpy-forecast-boj-intervention-leads-to-4-week-lows/