USD/JPY Forex Technical Analysis – Hovering Near 24-Year High Ahead of Major US Inflation Report

The Dollar/Yen is inching lower just under a 24-year high on Thursday as traders await the release of a key U.S. consumer inflation report.

The Consumer Price Index (CPI) report is expected to reinforce bets that the Federal Reserve will continue to tighten policy aggressively. Core inflation is projected to rise 6.5% year-on-year in September, compared with a gain of 6.3% the previous month.

At 08:54 GMT, the USD/JPY is trading 146.817, down 0.076 or -0.05%. On Wednesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $63.63, down $0.38 or -0.59%.

A strong CPI reading could trigger a further drop in the Japanese Yen, which may prompt policymakers to intervene. That is one reason behind Thursday’s tentative trade.

Nonetheless, any intervention is likely to have little long-term effect on the USD/JPY. The Forex pair should continue to move higher until the Federal Reserve stops raising rates or Bank of Japan policy takes on a less-dovish tone.

The minutes from the last Federal Reserve meeting released on Wednesday showed that officials agreed they needed to raise interest rates to a more restrictive level – and then maintain them there for some time – to meet their goal of lowering “broad-based and unacceptably high” inflation, even as the minutes contained a hint of a downshift in the pace of future monetary tightening.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 146.967 will signal a resumption of the uptrend. A move through 140.353 will change the main trend to down.

The minor range is 140.353 to 146.967. Its 50% level at 143.660 is the nearest support. This is followed by additional support at 141.388.

Daily Swing Chart Technical Forecast

Trader reaction to 146.893 is likely to determine the direction of the USD/JPY on Thursday.

Bullish Scenario

A sustained move over 146.893 will indicate the presence of buyers. Taking out the 24-year high at 146.967 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with no target at this time.

Bearish Scenario

A sustained move under 146.893 will signal the presence of sellers. If this generates enough downside momentum then look for a possible plunge into the first pivot at 143.660. Buyers could come in on the first test of this level, but if it fails then look for the selling to possibly extend into the second pivot at 141.388.