At the start of the new week, the Japanese yen is under pressure. Data released today showed that Japan's service-sector inflation rose again in September, reinforcing expectations of an imminent rate hike by the Bank of Japan (BoJ).
Since consumer inflation in Japan has exceeded the BoJ's 2% target for more than three years, the latest figures point to the need for tighter monetary policy from the central bank — although this has not yet translated into yen strength.
Japan's new Prime Minister Sanae Takaichi, regarded as the successor to former Prime Minister Shinzo Abe, is known for her stimulative economic approach. This raises concerns about the stability of the Bank of Japan's financial framework and casts doubt on prospects for further monetary tightening — which, in turn, limits demand for the yen.
In the United States, the Bureau of Labor Statistics reported on Friday that the overall Consumer Price Index (CPI) rose 0.3% in September, bringing the annual inflation rate to 3%. Excluding food and energy, the core CPI increased 0.2% month-over-month and remained stable at 3% year-over-year. These readings fell short of analysts' expectations, strengthening the market view that the Federal Reserve will cut interest rates at its next meeting. Traders are also pricing in a high probability of another rate cut in December at the FOMC meeting, limiting the U.S. dollar's upside potential following its Friday rebound from weekly lows.Moreover, divergent policy outlooks between the Bank of Japan and the Federal Reserve currently favor the lower-yielding yen, which in turn restrains further USD/JPY upside.
The Fed's decision is expected following its two-day policy meeting on Wednesday, while the Bank of Japan will release its Monetary Policy Statement on Thursday — both key events for determining the next major moves in USD/JPY.
On the trade front, China and the United States reached a framework agreement on a potential trade deal on Sunday, which will be discussed during the upcoming meeting between President Donald Trump and Chinese President Xi Jinping. This development has eased fears of a full-scale trade war between the world's two largest economies — a conflict that could have strengthened the yen's status as a safe-haven currency.
From a technical perspective, a break above the 153.25–153.30 level could serve as a new catalyst for USD/JPY's upward movement. With daily chart oscillators turning positive and still far from overbought territory, the pair appears poised to target the key psychological level of 154.00.
Conversely, the Asian session low near 152.56 serves as immediate support. A drop below this level could push USD/JPY toward intermediate support at 152.25, and then to the psychological 152.00 level. A decisive break below 152.00 would invalidate the bullish outlook, triggering technical selling and opening the door to deeper losses.
The material has been provided by InstaForex Company - www.instaforex.com
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At the start of the new week, the Japanese yen is under pressure. Data released today showed that Japan's service-sector inflation rose again in September, reinforcing expectations of an imminent rate hike by the Bank of Japan (BoJ).
Since consumer inflation in Japan has exceeded the BoJ's 2% target for more than three years, the latest figures point to the need for tighter monetary policy from the central bank — although this has not yet translated into yen strength.
Japan's new Prime Minister Sanae Takaichi, regarded as the successor to former Prime Minister Shinzo Abe, is known for her stimulative economic approach. This raises concerns about the stability of the Bank of Japan's financial framework and casts doubt on prospects for further monetary tightening — which, in turn, limits demand for the yen.
In the United States, the Bureau of Labor Statistics reported on Friday that the overall Consumer Price Index (CPI) rose 0.3% in September, bringing the annual inflation rate to 3%. Excluding food and energy, the core CPI increased 0.2% month-over-month and remained stable at 3% year-over-year. These readings fell short of analysts' expectations, strengthening the market view that the Federal Reserve will cut interest rates at its next meeting. Traders are also pricing in a high probability of another rate cut in December at the FOMC meeting, limiting the U.S. dollar's upside potential following its Friday rebound from weekly lows.
Moreover, divergent policy outlooks between the Bank of Japan and the Federal Reserve currently favor the lower-yielding yen, which in turn restrains further USD/JPY upside.
The Fed's decision is expected following its two-day policy meeting on Wednesday, while the Bank of Japan will release its Monetary Policy Statement on Thursday — both key events for determining the next major moves in USD/JPY.
On the trade front, China and the United States reached a framework agreement on a potential trade deal on Sunday, which will be discussed during the upcoming meeting between President Donald Trump and Chinese President Xi Jinping. This development has eased fears of a full-scale trade war between the world's two largest economies — a conflict that could have strengthened the yen's status as a safe-haven currency.
From a technical perspective, a break above the 153.25–153.30 level could serve as a new catalyst for USD/JPY's upward movement. With daily chart oscillators turning positive and still far from overbought territory, the pair appears poised to target the key psychological level of 154.00.
Conversely, the Asian session low near 152.56 serves as immediate support. A drop below this level could push USD/JPY toward intermediate support at 152.25, and then to the psychological 152.00 level. A decisive break below 152.00 would invalidate the bullish outlook, triggering technical selling and opening the door to deeper losses.
The material has been provided by InstaForex Company - www.instaforex.com