The USD/JPY Forecast Is Starting to Look Bullish
If you’re interested in the currency market, you may be wondering how the USD/JPY forecast is going to pan out. The good news is, this currency pair is breaking out of its bearish structure, and is now starting to look bullish. It’s important to note, however, that the price of living in the US hasn’t changed much, and that Japan’s inflation is substantially lower than its peers.
Price of living in the US remains high
The cost of living in the US is at an all time high. It’s difficult to get a grip on just how much it’s costing the average American family to enjoy a middle class lifestyle. Inflation and the rising cost of essential goods and services have forced many families to make sacrifices. Fortunately, there are some states that are less expensive to live in than others. Nonetheless, it’s important to be aware of your financial situation and what you can afford to spend.
The Consumer Price Index (CPI) is a good way to measure the cost of living in the U.S. It includes prices for various goods and services, including housing, transportation and food. The CPI is used in the design of Social Security payments and tax brackets. It’s also used to measure inflation, a topic of particular interest to the Federal Reserve.
The CPI is an oversimplified way to track the changes in the prices of consumer goods and services. A more detailed measure is the Chained Consumer Price Index for All Urban Consumers, which considers prices of commodities such as gasoline, foodstuffs, and clothing. The resulting index is designed to be more accurate than the CPI.
While it’s no secret that inflation is a hot topic in the media, the rate of increasehasn’t been this high in nearly 40 years. Specifically, the CPI has increased in five of the past six months, reaching an all-time high in the first half of 2022. This is a troubling sign because it means that many families are being put under a tight squeeze.
Despite this fact, the average American household still spends more on food and housing than they did in the early 1980s. And that’s a problem – not only are the costs of living skyrocketing, but the average wage isn’t keeping up with the inflation. This is especially true in low-paying industries like fast food and retail. The cost of living has become more costly for lower and middle-income households over the past three decades, according to recent studies. As a result, more and more Americans are relocating to better manage their budgets.
USD/JPY is breaking the structure from bearish to bullish
The USD/JPY pair is one of the most actively traded currency pairs in the world. Its value is directly affected by factors that affect the value of the Japanese Yen. In the case of the USD/JPY pair, the interest rate differential between the United States and Japan plays a large role in the value of the currency. In recent weeks, the USD/JPY pair has moved from bullish to bearish. A break in the technical structure from bearish to bullish would indicate a reversal in the market. However, the trend may retrace before the full breakout is achieved.
If the USD/JPY pair breaks its bearish trend, it could open up a counter-trend move to the upside. If the market continues to move below the breakdown level, traders could consider selling the pair in anticipation of a larger move lower. The US Equity market is currently pushing higher. This will drive demand for the dollar. Likewise, the Federal Reserve will look to meet its dual mandate of full employment and 2% inflation. In this scenario, it is possible that the Federal funds rate will rise from near zero to 2%. This will also increase the amount of money available in the U.S. Treasury markets, thus strengthening the US Dollar and the value of the Yen.
The yen is the third most liquid currency in the world. As it has historically decreased in value against the dollar, it tends to increase during times of market stress. Similarly, the flow of Japanese investment funds usually reverses during periods of market stress. Traders will use usual Weekly Initial Jobless Claims data to determine the direction of the next leg of a directional move for the USD/JPY pair. If the market breaks below the breakdown level, a double top might form. If the market continues to move above the breakdown level, a swing high might be reached.
The breakdown level is a line off of lows in March and April. During this time, the technical structure was a descending wedge with a floor in the 50-day moving average. The price then reversed above the 200-day eMA.
USD/JPY will move lower at the end of the month
The USD/JPY pair remains range bound. The market is looking to a Fed policy meeting in December. The Federal Open Market Committee (FOMC) is scheduled to meet on December 13-14. A number of factors will influence this event. The US consumer inflation figures will play an important role. The yen has been under pressure for the last few weeks. This is due to the US Federal Reserve hiking interest rates. Inflation remains above the Fed’s 2% target. This is making the dollar more appealing. The Fed’s aggressive increases have led to a pullback in bond yields. The Fed is likely to continue to hike, which will likely underpin more dollar strength.
The BoJ remains determined to maintain ultra-low interest rates. A rate rise would
restrict liquidity for the USD/JPY pairing. USD/JPY’s relationship with the US economy and the 10-year Treasury yield is also important. The yen is the most liquid currency in Asia, and its value is strongly affected by US interest rates. This makes the pairing a volatile one. If the Fed continues to increase rates, the yen could fall further. The Bank of Japan (BoJ) has a history of intervening in the forex market when economic growth is threatened. It will continue to use its policy tools to control the short-term interest rate. But if there is no change in the BoJ’s rate targets, the pair’s outlook is unclear.
The yen is historically treated as a safe haven. However, in recent months, yen’s inflation has risen. This has led the BoJ to set a short-term rate target at -0.25%. While the US/JPY is not considered a safe haven, it does have low bid-ask spreads. This can benefit traders as they can take advantage of frequent trading opportunities.
A variety of technical indicators can help traders determine how the USD/JPY pair is going to move. A relative strength index can indicate overbought and oversold conditions. There are also volume indicators that can help traders choose the right time to enter or exit trades. The USD/JPY pair has the potential to break through the bearish structure and head toward the 100 daily moving average. However, the FOMC policy meeting will continue to be the primary focus.