• Japan’s government lowered this year’s growth estimates.

• A Reuters poll on Friday revealed that the BoJ will forego a hike in July.

• Japan’s core inflation accelerated in June.

The USD/JPY price analysis is slightly bullish as the yen retreats from its recent highs amid signs the BoJ might not hike interest rates in July. Meanwhile, the dollar was steady despite poor US data. The yen has pulled back from its Wednesday highs after a series of interventions by the Bank of Japan to support the currency.

However, the focus is now on monetary policy outlooks in the US and Japan. Notably, Japan’s government lowered this year’s growth estimates. This comes from the recent drop in demand amid higher import costs from a weak yen. The government cut growth from 1.3% to 0.9%. A weak economy complicates Japan’s outlook for rate hikes, as higher borrowing costs could further hurt the economy.

Meanwhile, a Reuters poll on Friday revealed that the BoJ will forego a hike in July to support weak economic demand. This is bearish for the yen as the rate gap between Japan and the US will remain longer. However, economists also believe the central bank will scale back bond purchases. At the same time, most project the next rate hike in October.

There was some positive news for the yen as Japan’s core inflation accelerated in June, keeping hopes for a hike alive. The country’s core CPI rose 2.6%, slightly below forecasts of a 2.7% gain. Still, it was better than the 2.5% increase reported in May.

On the other hand, the US dollar was steady despite data showing weakness in the US labor market. Unemployment claims rose to 243,000, beating forecasts for 230,000.

USD/JPY key events today

Investors do not expect high-impact reports from the US or Japan today, meaning the pair might consolidate.

USD/JPY technical price analysis: Price retests 30-SMA after bullish RSI divergence

On the technical side, the USD/JPY price has pulled back after reaching the 156.00 key support level. It has found solid resistance at the 30-SMA. Notably, the price is in a developed downtrend with consistent lower highs and lows.

However, the RSI is making higher lows, indicating a bullish divergence with the price. Therefore, there is a chance that bulls will break above the 30-SMA to retest the 159.00 resistance. However, if bears are still in control, the price will make a lower low below 156.00.

https://www.forexcrunch.com/blog/2024/07/19/usd-jpy-price-analysis-bojs-uncertainty-weighs-on-yen/