USD/JPY prediction ahead of US consumer inflation data

on Jul 11, 2022
  • USD/JPY pair soared to the highest point in 24 years.
  • BoJ governor Haruhiko Kuroda vowed to maintain a dovish tone.
  • The next key catalyst will be the US consumer inflation data.

The USD/JPY price jumped to a multi-decade high on Monday as the Japanese yen crash accelerated. The pair is trading at 136.83, which is about 8.8% above the lowest level in May this year. It has risen by more than 20% in 2022.

Japanese yen crash accelerates

The USD/JPY price gained momentum on Monday after the Bank of Japan (BoJ) governor reiterated his dovish tone. In a statement, Kuroda said that the bank would likely provide more stimulus to support the economy as the recovery lags that of other countries.

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The BoJ has taken a significantly different tone against other central banks. While the Federal Reserve has hiked by 150 basis points this year, the BoJ has not done anything. Instead, the bank has signaled that it will maintain low-interest rates and continue with its asset purchases. 

The BoJ has maintained a dovish tone even as the Japanese yen has crashed to a multi-decade low and inflation has moved to over 2%. In most cases, the BoJ prefers a relatively weaker yen, which tends to support the country’s exports.

However, sentiment data published two weeks ago showed that many large and small companies in the country were struggling. Most of them are struggling with the rising cost of doing business as import prices jump. 

The USD/JPY pair also rose as signs of a more hawkish Federal Reserve emerged. Data published on Friday showed that the US non-farm payroll data rose by more than 372k in June of this year. This was significantly better than what most analysts were expecting. 

The next key data to watch will be the upcoming US consumer price index data scheduled for Wednesday this week. Analysts expect the data to show that the country’s inflation jumped to a 40-year high of 8.8%. 

USD/JPY forecast


The daily chart shows that the USD/JPY price has been in a strong bullish trend in the past few months. This trend accelerated after the company moved above the important resistance level at 131.16, which was the previous YTD high. It has also moved above the 25-day and 50-day moving averages while the Stochastic Oscillator has moved above the overbought level.

Therefore, there is a likelihood that the pair will keep rising as bulls target the key resistance at 140 in the coming weeks. A drop below the support at 134 will invalidate the bullish view.

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