- USD/JPY trades flat near 149.35 as traders turn cautious.
- The softer US CPI data could potentially boost the Fed's confidence that inflation will return to its target.
- The dovish remarks from the BoJ weigh on the Japanese Yen.
- Market players will closely watch the US Consumer Price Index (CPI) data for January, due on Tuesday.
The USD/JPY pair trades on a flat note during the early Asian session on Tuesday. The uncertainty about the timeline of interest rate cuts leads to the consolidation of the US Dollar (USD). Traders prefer to wait on the sidelines ahead of the US Consumer Price Index (CPI) data for January, which could offer some hints about when the Fed is likely to start cutting interest rates. As of writing, USD/JPY is trading higher by 0.02% on the day at around 149.35.
Tuesday's CPI report is a crucial event to watch. Headline CPI is predicted to grow 2.9% YoY, down from 3.4% in December. Core CPI, excluding volatile food and energy prices, is expected to be 3.7% YoY, down from 3.9% in the previous reading. On a monthly basis, investors expect the headline and core CPI to rise gradually at 0.2% and 0.3%, respectively.
Fed officials need more evidence that inflation is on a sustainable path to return to the 2% target before they start cutting rates. The softer US inflation data could potentially boost the Fed's confidence that inflation will return to its target. This, in turn, might weigh on the Greenback and act as a headwind for the pair. According to the CME FedWatch Tool, investors are pricing in 84.5% odds of rates holding unchanged in March, while the probability of 25 basis points (bps) rate cuts in May has decreased to 61% from over 95% at the beginning of 2024.
On the Japanese Yen front, the Bank of Japan (BoJ) governor Kazuo Ueda said last week that even if the BoJ ends minus rates, accommodative financial conditions will likely continue based on the bank’s economic outlook. BOJ deputy governor Shinichi Uchida indicated that it is difficult to see the central bank raising its policy rate consistently and fast even after the subzero rate regime ends. That being said, the dovish comments from the Japanese central bank might undermine the JPY and cap the downside of the USD/JPY.
Moving on, the US Consumer Price Index (CPI) data for January is due on Tuesday. Japan’s preliminary Gross Domestic Product for the fourth quarter (Q4) will be released on Thursday. Also, US Retail Sales will be monitored by traders.
|Today last price
|Today Daily Change
|Today Daily Change %
|Today daily open
|Previous Daily High
|Previous Daily Low
|Previous Weekly High
|Previous Weekly Low
|Previous Monthly High
|Previous Monthly Low
|Daily Fibonacci 38.2%
|Daily Fibonacci 61.8%
|Daily Pivot Point S1
|Daily Pivot Point S2
|Daily Pivot Point S3
|Daily Pivot Point R1
|Daily Pivot Point R2
|Daily Pivot Point R3
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.