USD/JPY Bears Target Sub-133 on Inflation and Jobless Claims

It is a quiet start to the day for the USD/JPY on Thursday. There are no economic indicators from Japan for investors to consider.

The lack of economic indicators will leave the US CPI Report to resonate early in the session. However, inflation figures from China and market risk sentiment will move the dial today. Hotter-than-expected inflation numbers should support the Yen.

Economists forecast China’s annual inflation rate to soften from 0.7% to 0.3%. Significantly, economists expect the producer price index to fall by 3.2% year-over-year versus a 2.5% decline in March.

USD/JPY Price Action

This morning, the USD/JPY was down 0.14% to 134.098. A mixed start to the day saw the USD/JPY rise to an early high of 134.368 before falling to a low of 134.017.

Technical Indicators

Resistance & Support Levels

The USD/JPY needs to move through the 134.621 pivot to target the First Major Resistance Level (R1) at 135.129. A return to 135 would signal a bullish USD/JPY session. However, the market risk sentiment and the US economic indicators must support a USD/JPY breakout.

In case of an extended rally, the bulls would likely test the Wednesday high of 135.470 but fall short of the Second Major Resistance Level (R2) at 135.979. The Third Major Resistance Level (R3) sits at 137.337.

Failure to move through the pivot would leave the First Major Support Level (S1) at 133.771 in play. However, barring a US data-fueled sell-off, the USD/JPY pair should avoid sub-133. The Second Major Support Level (S2) at 133.263 should limit the downside. The Third Major Support Level (S3) sits at 131.905.

Looking at the EMAs and the 4-hourly chart, the EMAs send bearish signals. The USD/JPY sits below the 200-day EMA (134.199). The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A USD/JPY move through the EMAs would support a breakout from R1 (135.129) to target the Wednesday high of 135.470. However, failure to move through the 200-day EMA (134.199) would leave S1 (133.771) in view. A USD/JPY move through the 50-day EMA (134.936) would send a bullish signal.

The US Session

Looking ahead to the US session, it is a busy day on the US economic calendar. US initial jobless claims and wholesale inflation numbers will be in focus.

Following the US CPI Report, softer wholesale inflation numbers and rising jobless claims would take further pressure off the Fed and support riskier assets.

Economists forecast initial jobless claims to increase from 242k to 245k and for the producer price index to increase 2.4% year-over-year in April versus 2.7% in March.

With inflation and the labor market in focus, we expect FOMC member commentary to also influence. FOMC member Christopher Waller is on the calendar to speak later today.

Beyond the economic calendar, the banking sector, the US debt ceiling, and corporate earnings also need consideration.