USD/JPY: Dollar Extends Updraft to Cross 200-Day SMA as Interest Rate Decisions Loom

Central banks on both sides of the trade decide their interest rates next week. December 18 and 19 will be days for the day traders.

• The USDJPY pair is pushing forward for the fifth consecutive day on Thursday with forex traders heavily betting on the US dollar. The exchange rate hit a two-week high of ¥152.60 this morning and along the way crossed a vital technical indicator — the 200-day moving average. Earlier this week, the dollar managed to pass both the 50-day and the 100-day moving averages, indicating it’s firing on all cylinders.
• Тhe dollar’s upside swing is rather controversial for one specific reason — inflation is staying in line with expectations. November’s consumer price index ticked up to 2.7% on an annualized basis and the monthly pace came in at 0.3% — both readouts meeting analyst forecasts. The reports helped investors build even more confidence in an interest rate cut by the Federal Reserve next week, December 18. And that in theory means less yield from the US dollar.
• On the other end of the trade, the Japanese yen is getting weaker as the Bank of Japan is also calling the shots on interest rates a day after the Fed’s decision. But traders expect Japan’s policymakers to keep interest rates flat despite the languishing yen asking for rates to go up. And that is perhaps what’s driving the dollar-yen higher as the greenback is staying muted against other major rivals, such as the euro and the sterling.