Last weekend’s U.S. employment data was stronger than expected, pushing USD/JPY to its highest level since July last year at 158.87. The U.S. dollar gained broadly as markets now expect only one interest rate cut from the Federal Reserve this year. However, rising interest rates led to a sharp drop in U.S. stock markets, increasing “risk-off” sentiment and pushing the yen higher, bringing USD/JPY back down to 157.23.
In Japan, many companies are expected to raise wages this year, and the Bank of Japan may raise its inflation outlook at the next meeting. This has increased expectations of additional interest rate hikes by the Bank of Japan.
The U.S. December Consumer Price Index (CPI), to be released this week, is expected to show a rise from the previous month. However, markets have already priced in concerns about inflation, causing long-term interest rates to rise.
USD/JPY may struggle to rise above 158.87, as this level is seen as a strong ceiling, especially with concerns about possible market intervention.
Today’s Predicted USD/JPY Range: 158.20–157.20
This Week’s Predicted USD/JPY Range: 159.00–156.00
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