USD/JPY Weakness Persists with US PPI Unfazed by Higher Tariffs

US Dollar Outlook: USD/JPY

USD/JPY falls to a fresh weekly low (143.19) as the update to US Produce Price Index (CPI) shows the core rate narrowing to 3.0% from 3.2% in April, and the exchange rate may no longer trade within the May range should it fail to defend the rebound from the monthly low (142.38).

USD/JPY Weakness Persists with US PPI Unfazed by Higher Tariffs

Data prints coming out of the US continues to drag on the Greenback as higher tariffs seem to be having a limited impact on inflation, and little indications of a price shock may push the Federal Reserve to further unwind its restrictive policy as the central bank pledges to ‘determine the appropriate stance of monetary policy based on the incoming data, the outlook, and the balance of risks.’

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In turn, the US Dollar may face additional headwinds ahead of Fed rate decision June 18 especially as President Donald Trump states that the ‘Fed should lower one full point,’ and it remains to be seen if the central bank will adjust the forward guidance for monetary policy as Chairman Jerome Powell and Co. are slated to update the Summary of Economic Projections (SEP).

With that said, speculation for lower US interest rates may keep USD/JPY under pressure, but the exchange rate may continue to trade within the May range as long as it defends the rebound from the monthly low (142.38).

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/JPY on TradingView

• USD/JPY pulls back ahead of 145.90 (50% Fibonacci extension) to register a fresh weekly low (143.19), and a close below the 144.40 (23.6% Fibonacci retracement) to 144.60 (50% Fibonacci extension) region may lead to a test of the monthly low (142.38).
• Failure to defend the rebound from the May low (142.12) may push USD/JPY towards the 140.50 (61.8% Fibonacci retracement) to 141.50 (38.2% Fibonacci extension) zone, with the next area of interest coming in around the April low (139.89).
• Nevertheless, USD/JPY may continue to hold within the May range if it defends the advance from the monthly low (142.38) but need a move/close back above the 144.40 (23.6% Fibonacci retracement) to 144.60 (50% Fibonacci extension) region to bring 145.90 (50% Fibonacci extension) back on the radar.

Additional Market Outlooks

US Dollar Forecast: USD/CHF Falls Toward Monthly Low amid Soft US CPI

US Dollar Forecast: EUR/USD Holds Above Monthly Low Ahead of US CPI

Canadian Dollar Forecast: USD/CAD Coils Within June Opening Range

AUD/USD Climbs Toward Monthly High amid US-China Trade Talk

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong