US Dollar Forecast: USD/JPY on Cusp of Testing Yearly High

US Dollar Outlook: USD/JPY

USD/JPY is on the cusp of the yearly high (151.72) as it extends the series of higher highs and lows from the start of the week, and the exchange rate may track the positive slope in the 50-Day SMA (149.11) as it bounces back ahead of the moving average.

US Dollar Forecast: USD/JPY on Cusp of Testing Yearly High

USD/JPY stage a five-day rally as Federal Reserve Chairman Jerome Powell warns that ‘Inflation has given us a few head fakes,’ and the Greenback may continue to appreciate against the Japanese Yen as the Bank of Japan (BoJ) sticks to Quantitative and Qualitative Easing (QQE) with Yield Curve Control (YCC).

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As a result, speculation surrounding US monetary policy may sway USD/JPY as Chairman Powell warns that ‘if it becomes appropriate to tighten policy further, we will not hesitate to do so,’ and fresh data prints coming out of the US may force the central bank to pursue a more restrictive policy as the Consumer Price Index (CPI) is expected to reveal sticky inflation.

US Economic Calendar

FOREX.com Economic Calendar

The core CPI is projected to increase 0.3% for the third consecutive month, with the year-over-year reading anticipated to hold steady at 4.1% in October, and indications of steady price growth may prop up USD/JPY as it puts pressure on the FOMC to further combat inflation.

However, a softer-than-expected CPI report may generate a bearish reaction in the US Dollar as it encourages the Federal Open Market Committee (FOMC) to keep US interest rates unchanged, and waning expectations for another Fed rate-hike may rattle the recent advance in USD/JPY as the central bank appears to be nearing the end the end of its hiking-cycle.

With that said, speculation surrounding US monetary policy may sway USD/JPY as the BoJ seems to be in no rush to switch gears, and the exchange rate may track the positive slope in the 50-Day SMA (149.11) as it bounces back ahead of the moving average.

USD/JPY Price Chart – Daily

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

• USD/JPY bounces back ahead of the 50-Day SMA (149.11) to stage a five-day rally, with the exchange rate approaching the yearly high (151.72) as it seems to be tracking the positive slope in the moving average.
• The recent series of higher highs and lows may lead to a test of the 2022 high (151.95), with the next area of interest coming in around the July 1990 high (152.25) followed by the 153.50 (50% Fibonacci extension) area.
• Nevertheless, USD/JPY may struggle to retain the bullish price series if it struggles to clear the yearly high (151.72), with a move below 149.40 (100% Fibonacci extension) to 150.30 (61.8% Fibonacci extension) region bringing the moving average back on the radar.

Additional Market Outlooks:

Euro Forecast: EUR/USD Bounces Ahead of 50-Day SMA to Eye Monthly High

US Dollar Forecast: GBP/USD Vulnerable if Monthly Low Breaks

--- Written by David Song, Strategist

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