USD/JPY Prediction: Is it a Buy or Sell Ahead of US CPI Data?

The USD/JPY price moved sideways in the past few days as investors waited for the upcoming American consumer and producer price index data. It was trading at 142.56 on Tuesday morning, which was about 9.31% above the highest level in August. 

US inflation data ahead

The USD/JPY price has been in a strong bullish trend in the past few weeks as investors focus on the widening divergence between the Federal Reserve and the Bank of Japan. In the United States, the Fed has been extremely hawkish despite some positive signs about inflation. The bank has maintained interest rates at an elevated level and hinted that it will continue hiking. 

On the other hand, in Japan, the BoJ has maintained a dovish tone even as inflation remains at an elevated level. The bank has left its interest rate unchanged and continued with its quantitative easing (QE) policy. Data published on Tuesday showed that the country’s producer price index (PPI) remained at 9.0% in August, which was higher than the median estimate of 8.9%.

The next key catalyst for the USD to JPY exchange rate will be the upcoming US inflation data. Economists believe that the country’s inflation pulled back slightly in August as the price of most items dropped. For example, used cars, gasoline, and airfares have been in a downward trend. Therefore, they expect that the headline inflation fell from 8.5% to 8.1%. Core inflation, which excludes the volatile food and energy prices rose slightly.

USD/JPY forecast

The USDJPY price has been in a strong bullish trend in the past few days. The rally accelerated when the pair moved above the important resistance at 139.36, which was the highest level on July 14. It has moved above the 25-day and 50-day moving averages. At the same time, the Awesome Oscillator has moved slightly below the neutral point. 

Therefore, there is a likelihood that the pair will likely continue rising as bulls target last week’s high of 144.97. A move below the key support at 141 will invalidate the bullish view. The bullish view is supported by our highly accurate S&R indicator, which you can subscribe to here.