• In November, the inflation rate in the United States reached 6.8%, its highest level in four decades.
  • After climbing to 113.00 on Monday, the USD / JPY came to a halt.
  • The yield on US Treasury bonds is up, but still below recent highs.
  • The Fed is expected to hike rates at its December 15 meeting, which is a coordination meeting.

The weekly forecast for USD / JPY remains mixed as the fundamental scenario is an upside bias, while technically the retracement looks due after a bull run.

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The US credit markets and the US Federal Reserve are holding the USD / JPY hostage. US inflation can only be contained in the short term if US Treasury bonds rise. The Federal Reserve doesn’t need to raise interest rates because the credit market will do all the work, but nearly two years of pandemic panic has forced traders to buy Treasuries on every unknown turn of the world. virus. A good example was the panic at Omicron two weeks ago.

In contrast, the Bank of Japan is moving in the opposite direction. Prime Minister Fumio Kishida has pledged fiscal and monetary policies to stimulate the Japanese economy. A new budget for additional government spending will be proposed, and the Bank of Japan may increase its purchases in the credit market. Japanese 10-year government bonds returned 0.056% last week and 0.051% last week, broadly flat.

Despite peaking at 1.764% on March 31, yields on US government bonds have risen several times this year. The Fed may be willing to encourage a hike in Treasury rates and trade rates, but credit traders want evidence, not rhetoric, after many false starts.

Japanese data was mixed. Household spending fell from -1.9% to -0.6% in October, but this was the third consecutive decline and the fourth in the past six months. In October, the wage increase was 0.2%, which is within the forecast range of 0.7% and in line with September. The Eco Watchers study, which tracks regional economic trends, performed better than expected on a current scale, but the outlook was poor. Producer prices rose 0.6% month-on-month and 9% year-on-year in November, faster than expected. Japan faces a deflationary environment.

Likewise, the US data was different. In October, the trade deficit improved and the number of initial jobless claims fell to 184,000, the lowest level in 52 years. In November, headline inflation is expected to hit 6.8% in headline, a 39-year high, and 4.9% in the core, also a three-year record, after 6.2% and 4.6% in October. After the CPI rose 1.2% in November last year, inflation jumped 5.6% last month, the fastest in 69 years.

After the release of the Consumer Price Index on Friday, the dollar fell slightly and inflation in the United States did not worsen after market conditions eased.

Key dates / events for USD / JPY

The US Federal Reserve and the Bank of Japan (BOJ), which meet on Wednesday and Thursday, will hold back and order the markets. Expect calm trading after the Fed’s rate announcement and tightening at 2:00 p.m. ET. Interest rate hikes in the United States are almost certainly due to rising consumer prices and concerns expressed by the Fed itself.

Due to the differences in interest rate concerns and policies between the Federal Reserve and the Bank of Japan, the USD / JPY pair is expected to rise. The Fed’s willingness to take inflation seriously will determine how quickly and how far it goes. The markets will find out on Wednesday.

USD / JPY Weekly Technical Forecasts: Main SMAs to Support Bears

weekly forecast usd / jpy

The USD / JPY price fell below the 20-day and 50-day SMAs as the volume tapered off. Such a condition usually foresees a bearish scenario. On the downside, the 111.80 – 112.00 band may provide strong support amid the 100 day moving average and round number effect.

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On the upside, 114.00 remains strong resistance to break ahead of swing highs at 114.75 and 115.50. The path of least resistance is downward.

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