USDJPY Technical Analysis – All eyes on the US CPI report

Fundamental
Overview

The USD is weaker across the board following the soft US PPI report yesterday. The market pricing is now showing a total of 31 bps
of easing by year end compared to 24 bps before the PPI. The focus remains on
the US CPI report today.

A hot report will likely cause some trouble in the markets with the
stock market looking as the most vulnerable right now.The best outcome would be a soft report given the overstretched moves in
the markets caused by the repricing in rate cuts expectations.

That would likely reverse most of the recent trends and trigger a correction
in Treasury yields and therefore in the US Dollar.

On the JPY side, BoJ’s
Ueda delivered some comments on monetary policy tonight and it seemed like
the January decision next week could still be live for a rate hike.

This is in line with the
recent news saying that the BoJ was still mulling on the
rate decision for January and that the central bank was considering raising its
inflation forecasts. The market is now pricing a 70% probability of a rate hike
next week.

USDJPY
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDJPY is still consolidating around the recent highs. From a risk
management perspective, the buyers will have a better risk to reward setup
around the major trendline, while the sellers will look for a
break below the trendline to extend the drop into the 149.00 handle next.

USDJPY Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the rangebound price action with the price now falling from
the 158.00 resistance as the sellers stepped in to target
a drop back into the support. The buyers will likely pile in around the support
to position for a rally into the 160.00 handle next.

USDJPY Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else we can add here as the sellers will keep on pushing towards the
support, while the buyers will look for a bounce around the support or a break
above the resistance to target new highs.

The red lines define the average daily range for today although they are
less reliable given that we’ve been stuck in a range for several weeks. The price
can extend beyond them today after the US CPI release.

Upcoming
Catalysts

Today, we have the US CPI report, while tomorrow we get the latest US Jobless
Claims figures.

Watch the video below

This article was written by Giuseppe Dellamotta at www.forexlive.com.