USD/JPY Forex Technical Analysis – Higher as Traders Shrug-Off Surge in Japan’s Core Inflation

James Hyerczyk
Updated: Jan 20, 2023, 12:23 UTC

Japan’s core consumer prices in December rose 4.0% from a year earlier, double the central bank’s 2% target, while hitting a fresh 41-year high.


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The Dollar/Yen is edging higher despite speculation that the Bank of Japan (BOJ) will eventually move away from its ultra-easy policy. The Forex pair is also being underpinned by firm U.S. Treasury yields.

At 06:17 GMT, the USD/JPY is trading 129.088, up 0.662 or +0.52%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) is at $72.65, up $0.23 or +0.32%.

Choppy Trade as Investors Assess Next BOJ Move

The USD/JPY strengthened earlier this week after the BOJ’s decision to stand pat on its ultra-loose monetary policy. However, it also weakened as traders still bet on a shift in the Bank of Japan’s policy.

However, analysts are divided on whether the BOJ could raise rates this year, due to uncertainty over whether wages will increase enough to offset the hit to consumption from rising living costs and keep inflation sustainably around 2%.

Japan’s Consumer Inflation Hits Fresh 41-Year High

Japan’s core consumer prices in December rose 4.0% from a year earlier, double the central bank’s 2% target, hitting a fresh 41-year high and keeping alive market expectations the central bank could phase out ultra-low interest rates.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through 127.227 will signal a resumption of the downtrend. A move through 134.775 will change the main trend to up.

The minor trend is up. It turned higher on Wednesday. The move shifted momentum to the upside.

The nearest support is the May 24, 2022 main bottom at 126.362. The closest resistance is a pair of 50% levels at 103.050 and 131.001.

Daily Swing Chart Technical Forecast

Trader reaction to a minor pivot at 129.403 is likely to determine the direction of the USD/JPY on Friday.

Bullish Scenario

A sustained move over 129.403 will indicate the presence of buyers. This could trigger a surge into a pair of pivots at 130.050 and 131.001. Overtaking this level could lead to a test of the minor tops at 131.578 and 131.872.

Bearish Scenario

A sustained move under 129.402 will signal the presence of sellers. This could lead to a retest of the main bottom at 127.227, followed by the long-term support at 126.362.

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About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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