USD/JPY Price Forecast: 20-day EMA continues to act as key barrier

On Wednesday, the Japanese Yen (JPY) rose against the US Dollar (USD), with USD/JPY falling 0.1% to around 159.00. Analysts at Scotiabank anticipate the Bank of Japan (BoJ) will increase policy rates by 25 basis points (bps) to 1.25% during the September meeting. While markets have started to incorporate expectations of near-term policy moves, strategists caution that central bank communication may hold more sway than the September 18 meeting decision itself.

The August 17-24 Reuters survey revealed 57% of economists expecting a 25 bps rate hike in September, a significant shift from a July poll where only 5% anticipated such a move. Meanwhile, the US Dollar trades lower before the US Personal Consumption Expenditure Price Index (PCE) data for July, which is set for release at 12:30 GMT.

Wells Fargo economists do not foresee any significant surprise in the July inflation data, projecting a 0.1% gain in the PCE deflator in July, bringing the year-over-year rate to 3.6%. They also anticipate core PCE inflation to rise 0.2% on the month, maintaining the annual rate at 3.3%, indicating a gradual easing of price pressures.

In the daily chart, USD/JPY is trading at 159.08, below the 20-day exponential moving average (EMA) at 159.46, indicating bearish short-term bias. The pair has retreated from recent highs and now sits under this short-term trend gauge, suggesting topside pressure. The Relative Strength Index (RSI) around 44 is slightly negative but not oversold.

If USD/JPY manages to close above the 20-day EMA at 159.46, it could alleviate the current downside bias and open the door for a recovery toward higher levels.