USD/JPY Forex Technical Analysis – Pressured by BOJ Rate Hike Expectations Ahead of US PCE Inflation Data

The Dollar/Yen is edging lower on Friday as heated Tokyo inflation readings spurred bets that a hawkish pivot from the Bank of Japan (BOJ) could be in the offing.

The Japanese Yen jumped against the U.S. Dollar after data showed consumer price inflation in Japan’s capital accelerated to a nearly 42-year peak this month, piling pressure on the BOJ to step away from stimulus.

At 10:54 GMT, the USD/JPY is trading 129.765, down 0.464 or -0.36%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $71.56, down $0.40 or -0.56%.

Investors are now awaiting the release of the personal consumption expenditure price index (PCE) report at 13:30 GMT, which is one of the Federal Reserve’s favored inflation measures. It reflects how much consumers spend on goods and services.

Personal income and spending figures ae also due Friday.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending lower.

A trade through 127.227 will signal a resumption of the downtrend. A trade through 134.775 will change the main trend to up.

The minor trend is up. This is controlling the momentum. A trade through 131.578 will confirm the momentum shift.

The USD/JPY has been testing a series of 50% levels at 129.403, 130.050 and 131.001 for eight sessions. This represents investor indecision and impending volatility, probably being fueled by uncertainty ahead of next week’s Federal Reserve interest rate announcement.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 130.050 is likely to determine the direction of the USD/JPY on Friday.

Bearish Scenario

A sustained move under 130.050 will indicate the presence of sellers. The first target is a pivot at 129.403. Crossing to the weak side of this level will put the USD/JPY in a position to accelerate to the downside with 127.227 the next likely target.

Bullish Scenario

A sustained move over 130.050 will signal the presence of buyers. The first upside target is a pivot at 131.001, followed by 131.578. This is a potential trigger point for an acceleration into a minor top at 132.872.