Pricing in Possibilities: USDJPY Outlook Hinges on PCE Report’s Impact on Fed Policy.

Pricing in Possibilities: USDJPY Outlook Hinges on PCE Report’s Impact on Fed Policy.

The Japanese May inflation data released earlier today showed that inflation slowed faster than expected after coming in at 3.2% against the expected decline to 3.3%, boosting the Yen against the US dollar.

The Friday bearish session is threatening to cap the four-day bullish streak ahead of the US PCE data later today. However, the market could be firmly focused on the Fed’s favoured inflation report to gauge the potential direction of the monetary policy path following the release of the US jobless claim, which came in lower than expected on Thursday.

Technical

The 4H chart shows that the Gopher recently broke out of an ascending channel, and the price action is experiencing a pullback to retest the channel’s resistance. The bulls would hope the price action rejects the channel and confirms the breakout. The confirmation of the breakout could trigger a rally towards the resistance level at 140.212, with the 140.737 resistance level as the next target.

However, the channel’s resistance failure to hold would trigger a run towards the 138.241 support level. The fall of the initial support level would bring the 137.241 support level into play, with the 50-day moving average acting as immediate support towards the level.

Summary

The market is firmly focused on the PCE report from the US, with the data expected to heavily influence the Fed’s monetary policy path in the near future. The CME FedWatch Tool is reporting that the market is pricing in a 42.3% probability of a 25 basis points hike, up from 17.4% a week ago.

Sources: TradingView, MT Newswire, Reuters.

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