• The USD/JPY forecast shows continued strength in the dollar amid geopolitical uncertainty.
• Market participants are anticipating the US CPI report.
• Data on Wednesday revealed softer-than-expected US wholesale inflation.

The USD/JPY forecast shows continued strength in the dollar amid geopolitical uncertainty. The greenback rose despite downbeat US wholesale inflation and ahead of the CPI report. Meanwhile, the yen remained fragile as traders worried about the outlook for Japan’s politics and monetary policy.

The US dollar extended gains on Thursday as market participants eagerly awaited the US CPI report. Notably, the rally gained momentum after reports of an escalation in the Russia-Ukraine war. The conflict between the two countries spilled into Poland, which had to shoot down Russian drones.  Consequently, there were worries of an escalation into other countries. As a result, traders sought safety in the dollar.

Meanwhile, data on Wednesday revealed softer-than-expected wholesale inflation, further supporting the view of a more dovish Fed.

“The market has positioned for the Fed to ease in September and potentially ease three times this year,” said Rodrigo Catril, currency strategist at National Australia Bank in Sydney. “The benign outcome from the PPI tells you pricing expectations look about right.”

Elsewhere, the yen remained subdued as Ishiba’s resignation caused uncertainty about the future. A new prime minister could assume a different stance regarding rate hikes, changing the outlook for monetary policy.
 

USD/JPY key events today

• US core CPI m/m
• US CPI m/m
• US CPI y/y
• US unemployment claims
   

USD/JPY technical forecast: Bulls take charge after false channel breakout
 

(Click on image to enlarge)

USD/JPY 4-hour chart
 

On the technical side, the USD/JPY price has broken above the 30-SMA, indicating a bullish shift in sentiment. At the same time, the RSI trades above 50, suggesting stronger bullish momentum. This is a sign that bulls have taken charge and might send the price higher.

USD/JPY has been trading in a shallow bullish channel. Recently, bears attempted to break out of this channel. However, they failed when the price could not break below the 146.50 key support level. As a result, it rose back into the channel and broke above the 30-SMA.

With bulls in the lead, the price might soon retest the channel resistance, near the 149.00 key level. A break above this level would signal a surge in bullish momentum, leading to a steeper bullish trend. On the other hand, if the level holds firm, USD/JPY will remain in its channel.

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