USD/JPY climbs toward 148.00 ahead of US CPI data

• USD/JPY rises above 147.00 as investors look ahead to Tuesday's US Consumer Price Index release.
• The US Dollar remains bid against the safe-haven Japanese Yen as yield differentials remain supportive of USD/JPY strength.
• USD/JPY momentum turns bullish as the RSI rises to 64.

The Japanese Yen (JPY) remains on the back foot against the US Dollar (USD) on Monday as rate expectations and tariffs continue to drive sentiment.

With USD/JPY price action heading toward the 148.00 psychological level at the time of writing, attention is shifting to the release of US Consumer Price Index (CPI) data on Tuesday 

For the Bank of Japan (BoJ), low interest rates of 0.5% have continued to drive funds into higher-yield currencies such as the US Dollar.

As the Federal Reserve (Fed) maintains rates within the current range of 4.25%-4.50%, yield differentials remain a prominent driver of the USD/JPY pair.

However, with US President Trump ramping up criticism against Fed Chair Jerome Powell, focus shifts to Tuesday's Consumer Price Index data release.

Expectations are for CPI to show a monthly increase of 0.3% in June, with the annual rate expected to rise to 2.7%, from 2.4% in May.

Meanwhile, the core CPI figure, which excludes food and energy, is also expected to increase by 0.3% MoM, with the annual rate expected to increase to 3%, from 2.8% in May.

With the USD/JPY pair remaining vulnerable to shifts in rate expectations, Tuesday's data remains crucial for the pair's next move.

USD/JPY daily chart

From a technical standpoint, USD/JPY continues to edge higher, with support emerging at the 38.2% Fibonacci retracement level of the January-April decline at 147.14. 

With price action lingering around 147.60 at the time of writing, psychological resistance remains firm at 148.00. A clear break of this level could see bulls retest the May high of 148.65, paving the way for the 50% Fibo level at 149.38.

In contrast, below the 38.2% Fibo level is the psychological support level of 146.00 and the 10-day Simple Moving Average (SMA) of 145.69. A break lower could see bears gain confidence, allowing them to retest the 50-day SMA support level at 144.87.

With the Relative Strength Index (RSI) reading near 64 at the time of writing, momentum is trading in favour of bulls, pushing the pair closer toward overbought territory.