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

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.

Join David Song for the Weekly Fundamental Market Outlook webinar.

David provides a market overview and takes questions in real-time. Register Here

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

StoneX Financial Ltd (trading as "FOREX.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, FOREX.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date.

This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. No opinion given in this material constitutes a recommendation by FOREX.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although FOREX.com is not specifically prevented from dealing before providing this material, FOREX.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Financial Ltd. StoneX Financial Ltd is a company incorporated in England and Wales with UK Companies House number 05616586 and with its registered office at 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is authorised and regulated by the Financial Conduct Authority in the UK, with FCA Register Number: 446717.

FOREX.com is a trademark of StoneX Financial Ltd. This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy. FOREX.com products and services are not intended for Belgium residents.