During testimony on Capitol Hill, Fed Chair Powell said labor market conditions were softening.
Wall Street Journal Chief Economics Correspondent Nick Timiraos commented,
“They’re (the Fed) now focused on a real chance of more weakness in the labor market than they would want to see, and that is not something we have heard from the Fed up until now.”
Other stats include housing and manufacturing sector data. However, retail sales and labor market data will likely influence the Fed rate path more.
With US retail sales and the labor market in focus, investors should track chatter from the Fed.
Will Fed Chair Powell Greenlight a September Fed Rate Cut?
On Monday, Fed Chair Powell is on the calendar to speak. Recent US inflation figures have raised investor bets on a September Fed rate cut.
According to the CME FedWatch Tool, the probability of a September Fed rate cut surged from 77.7% on July 5 to 96.3% on July 12.
Support for a September rate cut could increase expectations of a December Fed rate cut.
Short-term Forecast
Near-term USD/JPY trends depend on US retail sales, US jobless claims, and inflation numbers from Japan. Weaker-than-expected numbers from the US could cement a September Fed rate cut. Conversely, higher-than-expected inflation figures from Japan may fuel expectations of a July Bank of Japan rate hike. A shift in monetary policy goals could support a USD/JPY drop below 150.
Investors should remain alert in another pivotal week for the USD/JPY pairing. Monitor real-time data, central bank views, and expert commentary to adjust your trading strategies accordingly. Stay informed with our latest analysis and news to navigate the FX markets.
USD/JPY Price Action
Daily Chart
The USD/JPY sat below the 50-day EMA while holding above the 200-day EMA. The EMAs sent bearish near-term but bullish longer-term price signals.
A USD/JPY break above the 50-day EMA would support a move toward 160. A return to 160 could give the bulls a run at the July 10 high of 161.807.
Inflation figures from Japan, US retail sales, US jobless claims, and central bank commentary require consideration.
Conversely, a break below the 155 handle could signal a fall toward the 200-day EMA and the 151.685 support level.
The 14-day RSI at 41.07 suggests a USD/JPY drop below the 155 handle before entering oversold territory.
