The US dollar continues to strengthen against the Japanese yen, with USD/JPY now flirting with the upper boundary of a key technical pattern. With the June US CPI report due today and a barrage of FOMC speakers this week, traders are watching closely for clues on whether inflation is genuinely sticky—or simply transitory noise from base effects and tariff fears. Positioning data and chart patterns are beginning to favour further upside for USD/JPY, though volatility is likely as markets digest the data and political reaction.
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Bullish USD/JPY Momentum Builds as CPI and Fed Outlook Take Centre Stage
We have a slew of FOMC speakers lined up this week, and today’s US CPI report could shape the tone of their messaging. Jerome Powell recently outlined his expectation that Trump’s proposed tariffs would begin feeding into inflation during the summer months, making June’s CPI figures especially important. But we also have the ‘basing effect’ to factor in, which has seen forecasts for CPI to rise to 3% y/y (or 0.3% m/m) and CPI rise to 2.6% y/y or (0.3% m/m).
Traders then need to decipher whether any uptick in inflation is due to the basing effect or Trump’s tariffs and whether it is ‘transitory’. In either case I have a hard time believing today’s CPI release will allow the Fed to cut at their next meeting, so it really comes down to shift the odds for a September cut.
Fed Fund futures currently imply a 59.3% chance of a September cut. And expectations for higher CPI may have set the stage for even a modest uptick in inflation being interpreting it as ‘transitory’. So unless CPI prints well above expectations, traders could argue that inflation isn’t as concerning as Powell implies.
Naturally, any signs of soft inflation data could prompt Trump to weigh in, likely criticising the Fed — and Powell directly — for not already cutting rates by 100 basis points. Expect some political fireworks if the data underwhelms.
Chart prepared by Matt Simpson, data source: Bureau of Labor Statistics (LBS), London Stock Exchange Group (LSEG)
COT Data Signals Bullish Shift for USD/JPY as Yen Positioning Softens
Last week I outlined a technically bearish scenario for USD/JPY based around a potential symmetrical triangle pointing towards and eventual downside breakout on the weekly chart. Yet bearish momentum is clearly lacking and USD/JPY has risen over 1% since Thursday. This means prices for USD/JPY are at the extreme upper limits for the triangle, and therefore on the verge of being scrapped.
I also noted in yesterday’s COT report that net-short exposure to the US dollar index could be at a sentiment extreme for bears and that net-long exposure for yen futures might continue lower, given the reduction in short bets against the Japanese yen in recent weeks alongside a rise of longs. And that is bullish for USD/JPY should that trend continue.
Chart prepared by Matt Simpson, data source: CME, London Stock Exchange Group (LSEG)
USD/JPY Technical Analysis: US Dollar vs Japanese Yen
The weekly chart (left) shows USD/JPY trading around the upper trendline of the aforementioned symmetrical triangle. A softer-than-expected CPI print could trigger a short-term pullback in USD/JPY, though any retracement may be limited given the strong bullish momentum that has driven the US dollar higher against the Japanese yen.
It appears that USD/JPY is intent on testing the December low near 148.65 or the key 149.00 handle. A decisive break above either level would likely shift focus to the psychological 150.00 barrier.
That said, the 200-day EMA at 147.91 sits just below and could offer initial support or resistance in the near term. Still, a break above 148.00 would bring the December low within reach. With the daily RSI (14) trending higher and not yet overbought—confirming rising prices—a bullish breakout remains the more probable scenario, especially in a backdrop of a weak Japanese yen and resilient US dollar.
Chart analysis by Matt Simpson - data source: TradingView USD/JPY
Economic Events in Focus (AEST / GMT+10)
09:01 GBP BRC Retail Sales Monitor (YoY) (Jun) (GBP/USD, FTSE 100)
10:30 AUD Westpac Consumer Sentiment (Jul) (AUD/USD, ASX 200)
11:30 CNY House Prices (YoY) (Jun) (USD/CNH, Hang Seng Index, CSI 300)
12:00 CNY Fixed Asset Investment, GDP, Industrial Production, Retail Sales, Unemployment (Jun), NBS Press Conference (USD/CNH, Hang Seng Index, CSI 300)
17:00 EUR Core CPI (YoY), Spanish CPI (MoM & YoY), Spanish HICP (MoM & YoY) (Jun) (EUR/USD, DAX)
19:00 EUR German ZEW Current Conditions, German ZEW Economic Sentiment, Industrial Production (May), ZEW Economic Sentiment (Jul) (EUR/USD, DAX)
19:30 EUR German 2-Year Schatz Auction (EUR/USD, German Bonds)
20:00 EUR ECOFIN Meetings, Reserve Assets Total (Jun) (EUR/USD, DAX)
21:00 USD OPEC Monthly Report (Crude Oil, USD)
22:15 CAD Housing Starts (Jun) (USD/CAD, TSX)
22:30 USD Core CPI Real Earnings (Jun), NY Empire State Manufacturing Index (Jul) (USD, S&P 500, Nasdaq 100, Dow Jones, Gold, Crude Oil)
22:30 Core Manufacturing Sales (May), (USD/CAD, CAD/JPY, EUR/CAD, AUD/CAD, TSX)
22:55 USD Redbook (YoY) (USD, S&P 500)
23:15 USD FOMC Member Bowman Speaks (USD, US indices)
01:00 NZD GlobalDairyTrade Price Index (NZD/USD, NZX 50)
02:45 USD Fed Vice Chair for Supervision Barr Speaks (USD, US indices)
03:00 USD FOMC Member Barkin Speaks (USD, US indices)
04:45 USD Fed Collins Speaks (USD, US indices)
View the full economic calendar
-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
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