FOMC member Christopher Waller is scheduled to speak on Friday (May 17), potentially influencing investor expectations of a Fed rate cut in September. Waller recently stated that there is no urgency to lower interest rates, speaking before the release of the US Jobs Report and inflation data. This change in stance is something investors should pay attention to.
Although inflation pressures have eased, the US labor market remains strong. This could lead to wage growth and higher disposable income, which in turn may boost consumer spending and drive up demand-driven inflation.
In the short term, the direction of the USD/JPY currency pair will depend on central bank discussions. If the Fed signals a longer period of higher interest rates, this could benefit the US dollar. However, for a potential policy change from the Bank of Japan to be considered, economic indicators from Japan must show a shift in momentum.
On the daily chart, the USD/JPY is currently trading above both the 50-day and 200-day Exponential Moving Averages (EMAs), indicating a bullish trend. A break above the 156 handle could lead to a test of the 158 level, with a further upside target at the April 29 high of 160.209. Conversely, a break below the 50-day EMA may push the pair towards the 151.685 support level.
The Relative Strength Index (RSI) at 54.20 suggests that the USD/JPY could reach the April 29 high before potentially entering overbought territory. Market participants should consider commentary from the Bank of Japan and FOMC members on Friday for further insights into the currency pair’s price action.