US Inflation to Guide Fed Rate Cut Expectations and Dollar Trends
In the US, inflation data will drive expectations for Fed policy.
Key events include:
Consumer Inflation Expectations (June 9) to hold steady at 3.6% in May.
US Annual Inflation Rate (June 11) to rise from 2.3% in April to 2.5% in May.
Initial Jobless Claims (June 12) to fall from 247k (week ending May 31) to 239k (week ending June 7).
Michigan Inflation Expectations and Consumer Sentiment (June 13). Inflation expectations to hold steady at 6.6% in June, while consumer sentiment is expected to rise from 52.2 in May to 53.5 in June.
Hotter-than-expected inflation data could sink expectations of a 2025 Fed rate cut, boosting US dollar appetite. Conversely, softer inflation readings may revive Fed rate cut hopes, pressuring US dollar demand. The US CPI Report will be the key economic data release.
Meanwhile, consumer sentiment (due June 13) will give insights into the consumption and economic outlook. Since private consumption makes up over 60% of US GDP, improving consumer sentiment could indicate higher consumption, fueling inflation. However, an unexpected fall may support a more dovish Fed stance.
On the daily chart, the USD/JPY remains below the 50-day and 200-day EMAs, maintaining a bearish technical outlook.
A breakout above the 50-day EMA could pave the way to testing resistance at the May 29 high of 146.285. Sustained momentum could drive the pair toward the May 12 high of 148.647.
On the downside, a drop below last week’s low of 142.367 exposes the 140.309 support level and the September 2024 low of 139.576.
The 14-day Relative Strength Index (RSI) sits at 52.12, indicating potential for further upside before entering overbought territory (RSI > 70).
