USD/JPY Breaks Higher Before U.S. CPI; Market Eyes Fed Rate-Cut Odds

Economic

Traders' Opinions

Summary:

The U.S. dollar extended gains against the Japanese yen for a third consecutive session on Tuesday, climbing toward 148.50 ahead of key U.S. inflation data that could shape the Federal Reserve’s next move.

BUY USDJPY

Close Time

CLOSED

148.500

Entry Price

151.000

147.000

155.814 +0.255 +0.16%

150.0

Pips

Loss

147.000

Exit Price

148.500

Entry Price

151.000

The U.S. dollar extended its winning streak against the Japanese yen on Tuesday, rising for a third consecutive session to trade near 148.50 in European hours, as investors positioned themselves ahead of crucial U.S. Consumer Price Index (CPI) data for July. The reading, due at 12:30 GMT, is expected to test the market’s conviction on whether the Federal Reserve can begin cutting interest rates as soon as September.

Market focus is firmly fixed on the inflation print after June’s data showed a pickup in prices for goods heavily dependent on imports — a trend many analysts link to the latest round of tariffs imposed by U.S. President Donald Trump. With tariff effects often lagging in consumer prices, July’s report is seen as a key gauge of whether those pressures are intensifying.

Economists surveyed expect headline CPI to accelerate to 2.8% year-on-year from 2.7% in June. Core CPI, which strips out the more volatile food and energy components, is forecast to rise to 3.0% from 2.9%. Such an uptick, while modest, could undermine the Fed’s case for immediate rate cuts, forcing traders to reassess dovish bets that have built up over recent weeks.

According to CME’s FedWatch tool, markets are currently pricing in an 82% probability that the Fed will cut its benchmark rate by 25 basis points in September, bringing the target range to 4.00%-4.25%. However, stronger-than-expected inflation could reduce those odds, lifting U.S. yields and giving the dollar further support.

While U.S. rate expectations hang in the balance, the Japanese yen continues to struggle as the Bank of Japan (BoJ) signals no urgency to raise rates again this year. Last week’s BoJ Summary of Opinions revealed heightened concerns over global trade disruptions, particularly from the U.S. tariff measures. Policymakers appear wary of tightening into a slowing global environment, leaving the yen vulnerable to yield differentials and carry trade flows.

Investors will also keep an eye on Japan’s preliminary second-quarter GDP figures due Friday. Any sign of economic softness could reinforce the BoJ’s cautious stance, adding further downside pressure to the yen.

Technical Analysis

From a technical perspective, USD/JPY has broken decisively above the 148.00 resistance level, also surpassing the 50-day exponential moving average (EMA50) in the process. This breakout effectively removed a layer of downside pressure that had capped gains in recent weeks.

Momentum indicators are reinforcing the bullish bias, with the Relative Strength Index (RSI) showing positive signals despite entering overbought territory — a sign of strong buying interest rather than immediate exhaustion. The pair continues to trade within a well-defined short-term uptrend, supported by an ascending bias line.

The next key technical zone lies at 148.48, a support-turned-resistance cluster that could act as a springboard for further gains. A sustained move above this area would open the path toward 151.00, the next significant target for dollar bulls.

TRADE RECOMMENDATION

BUY USDJPY

ENTRY PRICE: 148.50

STOP LOSS: 147.00

TAKE PROFIT: 151.00

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Alan

Forex

Summary:

Recent employment data released by Canada shows unexpected weakness in the labor market, which may cause the Canadian dollar to come under pressure and weaken.

BUY USDCAD

Close Time

CLOSED

1.37925

Entry Price

1.39900

1.37100

1.37700 0.00000 0.00%

85.9

Pips

Profit

1.37100

1.38784

Exit Price

1.37925

Entry Price

1.39900

Fundamentals

Canada's July employment report revealed unexpected softness, with a net loss of approximately 41,000 jobs and the unemployment rate holding steady at 6.9%. This heightened market expectations that the central bank could shift to an easing stance (e.g., a rate cut in September or more dovish language) in the near term, exerting downward pressure on the Canadian dollar.

At the monetary policy level, the Bank of Canada kept its target interest rate unchanged at 2.75% last month. It emphasized in its monetary policy report that while inflation is approaching the target, risks of slowing economic growth persist. As a result, the market is closely watching whether upcoming data will support the Bank of Canada in maintaining its current stance or initiating an easing path. If CPI or employment data remains weak, the market will further lower expectations for Canadian interest rates, thereby weakening the Canadian dollar. Conversely, a rebound in inflation or improvement in employment data could lead to a rapid recovery in the Canadian dollar.

Technical Analysis

Bottoming Out and Rebounding, Uptrend May Return_1

After a period of sustained declines, USD/CAD has recently consolidated and bottomed out around 1.3570 in the daily chart. It tested this level three times consecutively without breaking below, signaling strong support and gradual accumulation of bullish momentum. Subsequently, in early August, driven by bulls, the pair breached the upper bound of its consolidation range at 1.3760, unlocking upside potential.

Currently, after breaching 1.3760, USD/CAD rallied to 1.3879 before correcting downward. It closed higher on August 7th to halt the decline and has maintained an upward trend for three consecutive trading days since then. This indicates that the previous consolidation range's upper bound of 1.3760 transitioned from resistance to support. Moreover, the short-term shift in candlestick structure further strengthened bullish momentum.

Trading Recommendations

Trading direction: Sell

Entry price: 1.3780

Target price: 1.3990

Stop loss: 1.3710

Valid Until: August 26, 2025, 23:00:00

Support: 1.3721/1.3570

Resistance: 1.3879/1.4000

Risk Warnings and Disclaimers

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Tank

Commodity

Economic

Forex

Technical Analysis

Summary:

Similar to gold, the weakness in silver is also linked to the uncertainty surrounding potential U.S. tariffs on imported silver. Last week, silver prices surged as traders digested rumors of tariffs on kilogram-grade silver, but as the long-term implications became clearer, the upward momentum diminished.

SELL XAGUSD

Close Time

CLOSED

37.800

Entry Price

36.400

38.500

61.927 -1.614 -2.54%

70.0

Pips

Loss

36.400

38.500

Exit Price

37.800

Entry Price

38.500