US dollar forecast
- U.S. dollar Gains ahead of the main US economic inflation Tuesday’s report
- CPI data may help guide the Fed’s policy outlook for 2023
- This article looks at the key US dollar / Japanese yenTechnical levels to watch in the upcoming sessions
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The US dollar, as measured by the DXY index, rose modestly on Monday, supported by higher US Treasury yields. In late afternoon trading, the dollar gauge rose about 0.15% to 103.75, up for a second day in a row amid market caution ahead of US inflation data.
The US Bureau of Labor Statistics is due to release its Consumer Price Index survey for May on Tuesday morning.
The annual headline CPI is expected to decline to 4.1% from 4.9% in April, weighed down by lower energy costs after oil’s downward correction last month. However, the core CPI, which reflects long-term trends in the economy and is closely tracked by central bank officials, may show less moderation and a slight improvement in trend, only falling to 5.3% from 5.5% previously.
Steady core rate pressures may force the Federal Reserve to maintain a hawkish stance this week, even if it eventually votes to keep interest rates steady at its June meeting. For example, the “pause” could be accompanied by sharper point projections, including higher final interest rates and no easing through 2024. This scenario should be bullish for the US dollar.
There will be more information and data to better assess the outlook for the currency market later this week, but the stars seem to align with more USD strength and, more importantly, increased volatility in the coming sessions. This can create attractive opportunities for traders looking for high volatility in major currency pairs, but also more risk, so caution is required.
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How to trade the US dollar/Japanese yen
Technical analysis of the USD/JPY pair
USD/JPY (USD-JPY) has been in an uptrend since late March, but bullish momentum has begun to wane in recent weeks, with prices in consolidation mode while curling up into a potential symmetrical triangle.
A symmetrical triangle, made up of two converging trend lines, one ascending connecting a series of higher highs and the other descending connecting a series of lower lows, is usually considered a continuation pattern once confirmed.
This setup is validated as soon as prices break through the triangle, especially if the movement is in the direction of the prevailing trend. In the case we are in, USD/JPY may be able to accelerate higher if it manages to break out on the upside, clearing the resistance at 140.00. If this scenario happens, we could see a move towards 140.70, followed by 142.50, the 61.8% Fibonacci retracement of the Oct 2022/Jan 2023 sell-off.
In the event of a reversal, initial support is located at 138.80. If the sellers manage to clear this floor, USD/JPY could soon revisit 138.00 ahead of a potential retest of the 200-day SMA.
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change in |
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| Daily | 0% | 4% | 3% |
| weekly | 4% | -3% | -1% |