USD/JPY Forex Technical Analysis – Pressured by Jump in Tokyo Core Consumer Inflation

The Dollar/Yen is edging lower on Monday with traders betting on a major policy shift by the Bank of Japan (BOJ) in a month or two. Meanwhile, traders aren’t too worried about the Federal Reserve, with investors pricing in a 25 basis point rate hike on Feb. 1. This is down from a 50 basis point rate hike in December.

At 06:18 GMT, the USD/JPY is trading 129.547, down 0.312 or -0.24%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $71.80, up $0.24 or +0.34%.

Last week, a report showed core consumer prices in Japan’s capital for the month of January marked the fastest annual gain in nearly 42 years, keeping the Bank of Japan under pressure to phase out its economic stimulus.

This means the BOJ is likely to change its ultra-dovish policy by tweaking its benchmark interest rate higher at a time when traders are already pricing in an interest rate cut by the Federal Reserve later in the year.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. 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. A trade through 131.578 will signal a resumption of the minor trend. A move through 127.573 will change the minor trend to down.

Support is a minor pivot at 129.403. Resistance is a pair of minor pivots at 130.050 and 131.001.

Daily Swing Chart Technical Forecast

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

Bearish Scenario

A sustained move under 129.403 will indicate the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into the minor bottom at 127.573, followed by the main bottom at 127.227. The major support is the May 24 main bottom at 126.362.

Bullish Scenario

A sustained move over 129.403 will signal the presence of buyers. This could lead to a labored rally with targets coming in at 130.050, 131.001 and 131.578.

The high at 131.578 is a potential trigger point for an acceleration to the upside with 132.872 the next likely target. This is the last potential support before the 134.775 main top.