- The US personal consumption expenditures (PCE) price index surged 0.6% last month.
- Japan’s core consumer inflation increased to 4.2% in January.
- Kuroda believes that high raw material costs cause current inflation.
Today’s USD/JPY forecast is bullish. A flood of positive US economic data put the dollar in the limelight on Monday, holding close to a seven-week high as it was confirmed that the Federal Reserve would need to increase interest rates for a more extended period.
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The dollar index is on pace to end a four-month losing streak with a 3% gain for February.
According to figures released on Friday, the personal consumption expenditures (PCE) price index, the Fed’s favorite measure of inflation, surged 0.6% last month after rising 0.2% in December.
According to the Commerce Department, consumer spending, which makes up more than two-thirds of all economic activity in the United States, increased by 1.8% last month.
Haruhiko Kuroda, head of the Bank of Japan (BOJ), reiterated on Saturday the central bank’s determination to maintain its ultra-loose monetary policy, despite inflation continuing to rise over its 2% objective.
According to data released on Friday, Japan’s core consumer inflation increased to 4.2% in January, a new 41-year high. This puts additional pressure on the central bank to gradually wind down its massive stimulus program.
Kuroda believes that companies’ efforts to pass on increased raw material costs to consumers are the main factors contributing to the increase in consumer inflation.
According to him, as the impact of earlier increases in raw material costs fades, the BOJ anticipates core consumer inflation to fall below 2% in fiscal 2023 and 2024.
USD/JPY key events today
Investors are expecting the core durable goods orders and pending home sales reports from the US that will give more insight into the state of the economy.
USD/JPY technical forecast: Bullish momentum
The 4-hour chart shows USD/JPY trading far above the 30-SMA after breaking out of tight consolidation. The RSI is trading well above the 50-mark, supporting strong bullish momentum. The price was initially consolidating with support at 134.00 and resistance at 136.03.
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The bulls have finally managed to push beyond the 135.00 resistance. They have also broken above the 136.03 level and are currently retesting it. The price will likely make a new high after retesting this level as bulls are strong.
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