Fed and BoJ monetary policies contribute to USDJPY decline down to 136.00

The USDJPY exchange rate is on the rise on Thursday, recovering from a nearly 9-month low reached the day before. The dollar was supported by the release of the US Consumer Price Index (CPI), which helped to partially offset previous losses.

Based on the data released yesterday, the US Consumer Price Index (CPI) rose by 0.2% in August. The same increase was recorded in July. However, the core index, which excludes volatile food and energy costs, rose by 0.3% last month. This indicates an acceleration in the country's inflation rate.

The CPI for August forced investors to reconsider their expectations for a rate cut by the Federal Reserve (Fed) at its meeting on September 18. According to CME FedWatch Tool, 85% of market participants now look for a 25-basis-point rate cut, and only 15% still anticipate more drastic measures from the regulator.

Early on Wednesday, Bank of Japan (BoJ) board member Junko Nakagawa confirmed the regulator's commitment to tightening monetary policy. Today, another BoJ board member Naoki Tamura, known for his support of tighter policy, said that markets’ expected pace of rate hikes could be too slow. These statements contributed to a partial recovery of the yen.

At the technical level, the USDJPY rates are forming a downtrend on the D1 timeframe. In terms of wave analysis, the price is forming the third descending wave on the H6 timeframe. Breaking through the top of the first wave at 141.75 has already taken place. This indicates a potential strengthening of the downward momentum.

Signal:

The short-term outlook for the USDJPY currency pair suggests selling. 

The target is at the level of 136.00.

Part of the profit should be taken near the level of 139.00.

A stop-loss could be placed at the level of 147.50.

The bearish trend is short-term, so trade volume should not exceed 2% of your balance.