The USD/JPY pair saw a drop late in the week, slipping below the 157.00 mark and settling around 156.50. This retreat came in the wake of new US Personal Consumption Expenditure (PCE) data, which hinted at more subdued inflation. This dampened the USD’s bullish run, although the Federal Reserve’s hawkish outlook could keep any downward movement somewhat contained.
Delving into the details, the Bureau of Labor Statistics unveiled that November saw softer price pressures. Prices of goods nudged up by less than 0.1%, while services experienced a 0.2% uptick. The increases in food and energy prices were also modest at 0.2%. When you strip out these volatile sectors, the Core PCE climbed by 0.1% from the previous month and 2.8% over the year, not meeting market predictions.
The Federal Reserve’s decision to cut the interest rate by 25 basis points on Wednesday, setting it between 4.25% and 4.50%, resonated with expectations and reflected levels last hit in December 2022. Nonetheless, Fed Chair Jerome Powell’s cautious tone regarding future rate cuts has dampened the anticipation for rapid easing. While softer inflation data offers some calm, there’s still much uncertainty about the Fed’s future actions. Market enthusiasts are now looking ahead to December’s job data due out in early January.
USD/JPY Technical Overview
As the USD/JPY eased back to 156.50, there’s a noticeable cooling in its upward momentum with technical signals showing mixed signs. The Relative Strength Index (RSI) faltered when it hit 70, hinting at possible fatigue in the current uptrend. On the flip side, the Moving Average Convergence Divergence (MACD) indicator is still printing rising green bars, maintaining a bullish outlook.
For the immediate future, support is identified at 156.00; if the pair drops further, 155.50 could be the next target. Conversely, resistance is pegged at 157.00, and a breakthrough there would be necessary to challenge recent highs again. While the broader uptrend seems intact, we might expect a consolidation phase before the next significant move emerges.
