US Dollar Forecast: USD/JPY Defends Post-US Election Rally

US Dollar Outlook: USD/JPY

USD/JPY appears to be defending the rally following the US election as it retraces the decline from the monthly high (154.71), and the exchange rate may attempt to break out of the opening range for November amid the limited reaction to the Federal Reserve rate-cut.

US Dollar Forecast: USD/JPY Defends Post-US Election Rally

USD/JPY rebounds ahead of the monthly low (151.29) on the back of US Dollar strength, and developments coming out of the US may continue to sway the exchange rate even as Fed Chairman Jerome Powell insists that ‘in the near term, the election will have no effects on our policy decisions.’

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US Economic Calendar

The update to the US Consumer Price Index (CPI) is anticipated to show the headline reading for inflation climbing to 2.6% in October from 2.4% per annum the month prior, while the core CPI is expected to hold steady at 3.3% during the same period.

Indications of persistent inflation may keep USD/JPY afloat as it put pressure on the Federal Open Market Committee (FOMC) to adjust policy at a slower pace, and the central bank may move to the sidelines at its last meeting for 2024 as the FOMC pledges to ‘make our decisions meeting by meeting.’

At the same time, a softer-than-expected CPI report may encourage the Fed to implement another rate-cut at the December meeting, and speculation for lower US interest rates may drag on the Greenback as the Chairman Powell and Co. are ‘on a path to a more neutral stance.’

With that said, USD/JPY may attempt to break out of the opening range for November as it retraces the decline from last week, but failure to push above the monthly high (154.71) may lead to a larger pullback in the exchange rate as the Relative Strength Index (RSI) holds below overbought territory.

USD/JPY Price Chart – Daily

Chart Prepared by David Song, Strategist; USD/JPY on TradingView

USD/JPY no longer carves a series of lower highs and lows as it bounces back ahead of the 200-Day SMA (151.71), with a breach above the monthly high (154.71) raising the scope for a move towards 156.50 (78.6% Fibonacci extension).
Next region of interest comes in around the 1990 high (160.40) but USD/JPY may face range bound conditions should it struggle to push above the monthly high (154.71).
At the same time, failure to hold above the monthly low (151.29) may push USD/JPY back towards the 148.70 (38.2% Fibonacci retracement) to 150.30 (61.8% Fibonacci extension) zone, with the next area of interest coming in around 144.60 (50% Fibonacci retracement) to 145.90 (50% Fibonacci extension).

Additional Market Outlooks

Monetary vs Fiscal Policy: Implications for FX Markets

US Dollar Forecast: EUR/USD Opening Range in Focus Ahead of US CPI

USD/CAD Still Holds Below Monthly High Following Dovish Fed Rate Cut

GBP/USD Recovers Ahead of 200-Day SMA amid Hawkish BoE Rate Cut

--- Written by David Song, Senior Strategist

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