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USD/JPY Breaks Higher Before U.S. CPI; Market Eyes Fed Rate-Cut Odds
Economic
Traders' Opinions
Summary:
The U.S. dollar extended gains against the Japanese yen for a third consecutive session on Tuesday, climbing toward 148.50 ahead of key U.S. inflation data that could shape the Federal Reserve’s next move.
Buy
CLOSEDUSDJPY
End Time
148.500
Entry Price
151.000
TP
147.000
SL
147.011 +0.084 +0.06%
1500
Points
Loss
147.000
SL
147.000
CLOSING
148.500
Entry Price
151.000
TP
The U.S. dollar extended its winning streak against the Japanese yen on Tuesday, rising for a third consecutive session to trade near 148.50 in European hours, as investors positioned themselves ahead of crucial U.S. Consumer Price Index (CPI) data for July. The reading, due at 12:30 GMT, is expected to test the market’s conviction on whether the Federal Reserve can begin cutting interest rates as soon as September.
Market focus is firmly fixed on the inflation print after June’s data showed a pickup in prices for goods heavily dependent on imports — a trend many analysts link to the latest round of tariffs imposed by U.S. President Donald Trump. With tariff effects often lagging in consumer prices, July’s report is seen as a key gauge of whether those pressures are intensifying.
Economists surveyed expect headline CPI to accelerate to 2.8% year-on-year from 2.7% in June. Core CPI, which strips out the more volatile food and energy components, is forecast to rise to 3.0% from 2.9%. Such an uptick, while modest, could undermine the Fed’s case for immediate rate cuts, forcing traders to reassess dovish bets that have built up over recent weeks.
According to CME’s FedWatch tool, markets are currently pricing in an 82% probability that the Fed will cut its benchmark rate by 25 basis points in September, bringing the target range to 4.00%-4.25%. However, stronger-than-expected inflation could reduce those odds, lifting U.S. yields and giving the dollar further support.
While U.S. rate expectations hang in the balance, the Japanese yen continues to struggle as the Bank of Japan (BoJ) signals no urgency to raise rates again this year. Last week’s BoJ Summary of Opinions revealed heightened concerns over global trade disruptions, particularly from the U.S. tariff measures. Policymakers appear wary of tightening into a slowing global environment, leaving the yen vulnerable to yield differentials and carry trade flows.
Investors will also keep an eye on Japan’s preliminary second-quarter GDP figures due Friday. Any sign of economic softness could reinforce the BoJ’s cautious stance, adding further downside pressure to the yen.
Technical Analysis
From a technical perspective, USD/JPY has broken decisively above the 148.00 resistance level, also surpassing the 50-day exponential moving average (EMA50) in the process. This breakout effectively removed a layer of downside pressure that had capped gains in recent weeks.
Momentum indicators are reinforcing the bullish bias, with the Relative Strength Index (RSI) showing positive signals despite entering overbought territory — a sign of strong buying interest rather than immediate exhaustion. The pair continues to trade within a well-defined short-term uptrend, supported by an ascending bias line.
The next key technical zone lies at 148.48, a support-turned-resistance cluster that could act as a springboard for further gains. A sustained move above this area would open the path toward 151.00, the next significant target for dollar bulls.
TRADE RECOMMENDATION
BUY USDJPY
ENTRY PRICE: 148.50
STOP LOSS: 147.00
TAKE PROFIT: 151.00
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