Friday Summary
The USD/JPY increased by 0.68% on Thursday, closing the day at 145.824. The USD/JPY surged from an early low of 145.598 to a high of 145.959 before reversing course in a breakout session. The losses on Wednesday were reversed out of fear of a hawkish speech from Fed Chair Powell.

Tokyo inflation figures raise uncertainty for BoJ policy, as the Bank of Japan remains ultra-loose despite July inflation numbers, and concerns about inflation.

Tokyo’s annual core inflation rate decreased from 3.0% to 2.8% in August, with economists expecting it to drop to 2.9%.

Japan may reconsider ultra-loose monetary policy based on inflation data and August private sector PMIs.

Powell, the Chair of the Fed, will have the last say. Today’s consumer sentiment data for Michigan will be of interest. Preliminary number revisions will need to be taken into account. The Michigan Consumer Sentiment Index declined from 71.6 to 71.2, according to preliminary data. Inflation forecasts decreased from 3.4% to 3.3%, still exceeding the Fed target of 2.0%, despite the Fed raising interest rates to 5.50%.

Fed Chair Powell may clarify the interest rate outlook after Michigan report, but investors remain divided on whether the Fed will deliver a final rate hike before applying brakes.

The US annual inflation rate and unemployment rate point to further tightening of monetary policy. The annual inflation rate in the US increased from 3.0% to 3.2% in July, but the unemployment rate decreased from 3.6% to 3.5%.

US private sector PMI statistics show slower growth, but investors remain concerned about Powell’s speech, making dovish or hawkish forward guidance vulnerable to USD/JPY reactions.

Fed Chair Powell may consider a rate hike before halting the stimulus, as the next set of US economic indicators could cause market uncertainty.

The USD/JPY chart displays the pair staying above the 50-day and 200-day EMAs while trading below the resistance zone of 146.60–147.30 The 62.00 RSI indicates bullish short- and long-term price signals, pointing to a move through the lower resistance band. If the lower band is breached, sub-144 could become relevant.

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