USD/JPY forecast ahead of the US consumer inflation data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Oct 12, 2021
  • The USD/JPY pair relentless rally continued on Tuesday.
  • The pair rose to the highest level since 2018.
  • The next key catalyst for the pair will be the US inflation data.

The USD/JPY pair popped to the lowest level since November 2018 as investors waited for the upcoming American inflation data. The pair is trading at 113.67, which is about 10% above the lowest level this year.

US inflation ahead

The USD/JPY price has been in a strong bullish trend in the past few weeks. The trend got supercharged when Japan got a new prime minister in the name of Fumio Kishida. Analysts expect that Kishida will continue the policies implemented by both Shinzo Abe and Yoshihide Suga.

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The price also rallied after the US published the relatively mixed jobs numbers on Friday. The data showed that the country’s economy added about 194k jobs while the unemployment rate declined to the lowest level since the pandemic started. Wages remained steady, signalling that the labour market is getting steady. 

On Tuesday, data by Japan’s statistics office showed that the gap between the country’s producer and consumer inflation was widening. While the CPI remains below 1%, the producer price index jumped to a multi-year high of 6.8%. This was significantly higher than the median estimate of 5.9%.

The next key data that will move the USD/JPY price will be the US inflation data. Economists polled by Reuters expect the data to show that the CPI remained unchanged at 5.3% in September while the core CPI remained unchanged at 4.0%. 

Still, there is a likelihood that the numbers will be better than expected. For one, the aviation industry that dragged prices in August recorded a strong comeback in September. At the same time, energy prices have jumped to a multi-year high, which could push prices higher. 

USD/JPY forecast

usd/jpy

The daily chart shows that the USD/JPY pair has been in a strong bullish trend in the past few weeks. The pair has jumped to a multi-year high of 113.65. Along the way, it has moved above the key resistance level at 111.65, which was the highest level in January. It was also the upper side of the rectangle pattern.The pair also moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved to the overbought level of 70. The MACD has moved above the neutral line. Therefore, the pair will likely keep rising as bulls target the next key resistance level at 114.

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