USDJPY – Down
Event to pay attention to today:
15:30 EET. USD – Unemployment Claims
USDJPY:
Markets continue to monitor the latest Personal Consumption Expenditures (PCE) price index from the US Bureau of Labour Statistics, a key inflation gauge for the Federal Reserve (Fed). The core PCE index rose at an annualised rate of 2.8% in November, which was below the forecast of 2.9%. On an annualised basis, the core PCE index rose to 2.4% from 2.3%, while an increase to 2.5% was expected.
Last week, the Fed cut the benchmark interest rate by 25 basis points to 4.50%. While the decision matched expectations, Fed Chairman Jerome Powell’s comments were subdued, causing traders to revise their forecasts. According to the updated dot plot, the Fed expects a 0.5% rate cut in 2025 instead of the previously expected 1%, indicating that it will limit the number of rate cuts to two instead of four. This change in stance supported the dollar, allowing it to renew local highs, but further gains look limited.
The Japanese yen, in turn, is supported by growing expectations of Bank of Japan (BoJ) policy tightening. National Consumer Price Index (CPI) data released on Friday pointed to a three-month high in inflation at 2.9 per cent year-on-year, up from 2.3 per cent in October. This data raises the probability of a rate hike by the Bank of Japan in early 2024, which puts additional pressure on USD/JPY. Given the current fundamental background, the pair retains the potential for further declines.
Trade recommendation: Watching the level of 150.00, trading mainly with Sell orders
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