• The BoJ will keep hiking interest rates if inflation comes in as expected.

• Economists predict at least one rate hike before the end of the year.

• Investors are gearing up for the US Consumer Price Index report.

The USD/JPY forecast shows renewed bearish momentum after the yen gained over 1% against the dollar after hawkish Bank of Japan remarks. At the same time, the dollar was fragile a day after the US presidential debate showed that Kamala Harris was in a stronger position.

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On Wednesday, Bank of Japan board member Junko Nakagawa said the central bank will keep hiking interest rates if inflation comes in as expected. She also said last month’s volatility had not changed the BoJ’s goal for higher interest rates. Higher borrowing costs in Japan will reduce the gap in rates between the US and Japan, boosting the yen.

Nevertheless, investors do not expect the central bank to hike this month. Meanwhile, economists predict at least one such move before the end of the year.

The yen also gained because the US presidential debate weakened the dollar. The debate added bets to a Kamala win and removed from Trump, reducing the likelihood of higher tariffs and increased government spending. The idea of a Trump win has always boosted the dollar since it could boost interest rates.

Meanwhile, investors are gearing up for the US Consumer Price Index report, which could give more guidance on the size of the next Fed rate cut. Economists expect inflation to reach the 2% target, with the headline figure hitting 2.9%. A softer-than-expected print could lead to a more dovish Fed. On the other hand, steady figures could suggest a gradual rate-cutting cycle.

USD/JPY key events today

• US core CPI m/m
• US CPI m/m
• US CPI y/y

USD/JPY technical forecast: Bullish RSI divergence

On the technical side, the USD/JPY price has made a new low after breaking below the 142.00 support level. The price trades well below the 30-SMA, indicating a bearish bias. At the same time, the RSI supports bearish momentum below 50.

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However, it has made a bullish divergence. While the price has made a lower low, the RSI has made a higher one. This shows that bearish momentum is fading. In that case, the price might soon retrace to the 30-SMA to challenge the bearish trend.

https://www.forexcrunch.com/blog/2024/09/11/usd-jpy-forecast-bank-of-japans-hawkish-tone-fuels-yen-rally/