USD/JPY outlook: Remains constructive and eyes US inflation and Fed verdict for fresh direction signals

USD/JPY

USDJPY remains constructive and probing above 157 barrier (the upper borderline of triangular consolidation and Fibo 61.8% of 160.19/151.85 bear-leg), but ranges are narrowing ahead of key releases this week – US inflation report and Fed rate decision, both due on Wednesday.

The dollar stands at the front foot following stronger than expected US jobs data, which adds to talks about further delay in Fed’s first rate cut, with bets gradually moving from September to November’s policy meeting.

US May CPI numbers and Fed dot plots will be in focus for fresh direction signals, with prevailing expectations for a hawkish scenario, which will keep the dollar inflated.

On the other hand, the Bank of Japan’s policymakers meet on Friday and may provide more details about QE tapering plan, as the central bank is expected to keep rates unchanged this time, but with growing expectations for a rate hike in July and total increase by 25 basis points by the end of the year.

More hawkishness from BoJ, along with their readiness to intervene again, if necessary, to support its national currency, may provide some support to yen.

Technical studies on daily chart are mixed, as MA’s remain in bullish configuration, positive momentum is fading and stochastic is overbought.

Expect initial positive signal on sustained break above 157.00 which would provide fresh boost to the price and expose targets at 157.70 (May 29 lower top) and 158.22 (Fibo 76.4% of 160.19/151.85).

Failure to clear 157 pivot would make the downside more vulnerable and risk test of first lower pivots at 156.10 (daily Tenkan-sen) and 155.76 (daily cloud top).

Res: 157.70; 158.22; 159.00; 160.19.
Sup: 156.83; 156.40; 156.10; 155.76.

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