- The USD/JPY outlook indicates increasing expectations for Bank of Japan rate hikes.
- Data on Friday revealed that Japan’s economy expanded by 1.0%.
- Fed rate cut bets eased slightly after upbeat wholesale inflation figures.
The USD/JPY outlook indicates increasing expectations for Bank of Japan rate hikes after upbeat GDP data from Japan. As a result, the yen gained against the dollar. However, data in the previous session revealed that US wholesale inflation rose by the most in three years in July.
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Data on Friday revealed that Japan’s economy expanded by 1.0%, well above the forecast of 0.4%. The upbeat numbers supported the outlook for a resumption of BoJ rate hikes. However, some economists believe the numbers are not to be trusted. Trump’s tariffs might weaken Japan’s economy before it recovers.
“The April-June data masked the real effect of Trump’s tariffs,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute. “Exports were strong thanks to solid car shipment volumes and last-minute demand from Asian tech manufacturers ahead of some sectoral tariffs. But these aren’t sustainable at all.”
Meanwhile, the dollar was steady on Friday as Fed rate cut bets eased slightly after upbeat wholesale inflation figures. The US PPI increased by 0.9% compared to the forecast of a 0.2% increase. Producer prices are usually an indicator of future consumer prices. Therefore, policymakers might be less confident about the future.
USD/JPY key events today
- US core retail sales m/m
- US retail sales m/m
- US preliminary UoM consumer sentiment
- US preliminary UoM inflation expectations
USD/PY technical outlook: Bears show strength in sideways move
On the technical side, the USD/JPY price has bounced lower after briefly breaking above the 30-SMA. This is a sign that bears are still in the lead. At the same time, the RSI trades below 50, suggesting solid bearish momentum.
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However, on a large scale, there is no clear direction as the price has been moving sdeways within the 146.00 – 149.01 consolidation area. At the same time, the price has been chopping through the 30-SMA, a sign that bears and bulls are almost equally matched.
Still, at the moment, bears are stronger. Therefore, the price might soon drop to retest the 146.00 key support level. A break below would mark an end to the range. Moreover, it would signal a stronger bearish momentum.
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Saqib Iqbal
