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USD/JPY edges up as U.S. inflation cools rate hike bets

Markets priced about a 32% chance of a Fed rate hike in September, down from roughly 52% earlier in the week, while Japanese intervention concerns eased.

Reported · Written up by our desk · Major Pairs

A softer mix of U.S. inflation data reduced expectations for higher U.S. interest rates, and that shift supported USD/JPY as buyers returned earlier in the week, according to Action Forex. CPI was in line with expectations and PPI came in slightly below expectations, helping lower rate-hike expectations.

As a result, markets were pricing around a 32% chance of a Fed rate hike in September, down from about 52% earlier in the week. The same data also limited the pair’s upside, as growing speculation pointed to a possible Bank of Japan interest rate increase as early as September.

On the broader cross-asset backdrop, concerns about another Japanese intervention eased, which helped USD/JPY move higher early in the week. The report also noted WTI crude oil rose again amid Middle East tensions, keeping supply disruption risks, including through the Strait of Hormuz, in focus.

The outlet said the 10-day moving average has turned higher and is providing support, suggesting buying on weakness may be the preferred approach. It also flagged nearby levels for USD/JPY resistance around 160.00 to 165.00 and support around 154.00 to 158.50.

Latest closeWTI crude $82.40 ▲1.4%|USD/JPY 159.31 ▼0.1%

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