• Japan announced a new prime minister on Friday after a tight race.

• Japan’s new prime minister, Ishiba, supports the current monetary policy moves.

• US inflation rose by 0.1%, which is smaller than the forecast of 0.2%.

The USD/JPY price analysis supports further downside as the yen rallies after Japan’s former defense minister, Shigeru Ishiba, won the seat for the next prime minister. Meanwhile, cooler-than-expected US inflation data weighed on the dollar.

Japan announced a new prime minister on Friday after a tight race. The outcome boosted the yen since Ishiba supports the current monetary policy moves. Therefore, he might continue supporting the Bank of Japan as it raises borrowing costs.

Although the last meeting was slightly cautious, economists expect at least one BoJ rate hike before the end of the year. Higher borrowing costs reduce the gap in rates between Japan and the US.

Elsewhere, market focus remained trained on the US core PCE report. The Federal Reserve recently cut interest rates by a massive 50-bps. It was a clear indication of confidence that inflation was under control. Therefore, policymakers expect price pressure to continue declining to the target.

Consequently, an unexpected figure could shift the outlook for future moves. Currently, there is a 50% chance of another massive reduction in November. Data on Friday revealed that inflation rose by 0.1%, smaller than the forecast of 0.2%. Therefore, the Fed has every reason to continue lowering borrowing costs.

Moreover, a soft landing is more likely since the economy remains resilient. Notably, data on Thursday showed that US unemployment claims dropped to 218,000 compared to expectations of 225,000. Another report revealed that corporate profits increased at a faster-than-expected rate.

USD/JPY key events today

• US Core PCE Price Index m/m

USD/JPY technical price analysis: Bearish engulfing candle signals reversal

On the technical side, the USD/JPY price has broken out of its bullish channel with a bearish engulfing candle. At the same time, the price has broken below the 30-SMA, indicating a shift in sentiment. Meanwhile, the RSI has dropped below 50, into bearish territory.

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However, the decline has reached the 143.01 support level and might pause here before continuing lower. A pause could allow the price to retest the recently broken channel support. If bears remain in control, the price will likely break below 143.01 support to retest the 141.01 level.

https://www.forexcrunch.com/blog/2024/09/27/usd-jpy-price-analysis-yen-gains-following-ishibas-victory/