US Dollar Forecast: A Fresh Rally in USD/JPY
The USD/JPY currency pair has surged to a new monthly peak of 152.18 as we approach the release of the US Consumer Price Index (CPI). This upward movement may continue as the exchange rate breaks through the early December trading range.
Market Dynamics: USD/JPY Strengthens Ahead of Critical CPI Data
Following a muted response to the US Non-Farm Payrolls (NFP) uptick of 227K, USD/JPY has established a consistent trend of higher highs and higher lows. This bullish momentum appears poised to continue, even as the Federal Reserve maintains a neutral monetary policy stance.
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As USD/JPY trends upwards, it aligns with the recent revival in long-term US Treasury yields. The focus now shifts to the CPI report, which is anticipated to indicate persistent inflationary pressures.
Economic Highlights Ahead: US CPI Expectations
The market expects the CPI report to show a rise from 2.6% in October to 2.7% in November, while the core inflation rate is forecasted to remain unchanged at 3.3%. Such signs of entrenched price growth could spark bullish sentiment for the US Dollar, potentially leading the Fed to adopt a more cautious approach in unwinding its tightening policies.
Conversely, any weaker-than-expected CPI figures could hinder the Greenback's strength, igniting speculation surrounding lower interest rates in the future.
As the carry trade dynamics shift, there might be a corrective phase in the USD/JPY rally. Nevertheless, the exchange rate may seek to recover from its recent November high of 156.75 if it manages to break through the current monthly trading range.
Technical Analysis: USD/JPY Daily Chart
- USD/JPY is attempting to surpass the significant resistance level at 151.95, building on a previous unsuccessful break below the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) range. A breakout above the 153.80 (23.6% Fibonacci retracement) could pave the way towards 156.50 (78.6% Fibonacci extension).
- A decisive move beyond the November high at 156.75 could attract attention towards the 160.40 level (1990 high), though a failure to maintain the upward trajectory may lead to a retracement from the monthly low of 148.65.
- A settled position below the 148.70 to 150.30 region would open doors for a deeper pullback towards 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension), with the October low at 142.97 being the next point of concern.
More Market Insights Expected
Traders should keep a close watch on the upcoming central bank decisions and economic reports that could further influence these currency movements.
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