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US Dollar Forecast: USD/JPY Rallies Ahead of US CPI Report

Article By: ,  Strategist
December 10, 2024 9:00 PM

US Dollar Outlook: USD/JPY

USD/JPY rallies to a fresh monthly high (152.18) ahead of the update to the US Consumer Price Index (CPI), and the exchange rate may extend the advance from the start of the week as it breaks above the opening range for December.

US Dollar Forecast: USD/JPY Rallies Ahead of US CPI Report

USD/JPY carves a series of higher highs and lows after showing a limited reaction to the 227K rise in US Non-Farm Payrolls (NFP), and the bullish price series may persist even as the Federal Reserve pursues a neutral stance.

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In turn, USD/JPY may mirror the recent recovery in long-term US Treasury yields as it attempts to trade back the 50-Day SMA (151.66), and it remains to be seen if the US Consumer Price Index (CPI) will sway the exchange rate as the update is anticipated to show sticky inflation.

US Economic Calendar

The US CPI is expected to increase to 2.7% in November from 2.6% per annum the month prior, while the core rate of inflation is projected to hold steady at 3.3% during the same period.

As a result, signs of persistent price growth may generate a bullish reaction in the US Dollar as it puts pressure on the Fed to unwind its restrictive policy at a slower pace, but a softer-than-expected CPI report may produce headwinds for the Greenback as it fuels speculation for lower interest rates.

With that said, a further shift in the carry trade may curb the recent rally in USD/JPY as major central banks switch gears, but the exchange rate may further retrace the decline from the November high (156.75) as it breaks out of the monthly opening range.

USD/JPY Price Chart – Daily

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

  • USD/JPY attempts to trade back above 151.95 (2022 high) following the failed attempt to break/close below the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone, with a breach above 153.80 (23.6% Fibonacci retracement) raising the scope for a move towards 156.50 (78.6% Fibonacci extension).
  • A breach above the November high (156.75) brings the 160.40 (1990 high) back on the radar, but USD/JPY may struggle to retain the rebound from the monthly low (148.65) should it snap the recent series of higher highs and lows.
  • Need a close below the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone to open up the 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension) region, with the next area of interest coming in around the October low (142.97).

Additional Market Outlooks

EUR/USD Monthly Opening Range Intact Ahead of ECB Rate Decision

USD/CAD Forecast: Canadian Dollar Vulnerable to BoC Rate Cut

GBP/USD Remains Susceptible to Bear Flag Formation

Australian Dollar Forecast: AUD/USD Eyes Yearly Low Ahead of RBA

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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