USD/JPY to Target 132.50 on US Wholesale Inflation and Jobless Claims

It is a quiet morning for the USD/JPY. There were no economic indicators from Japan to influence. The lack of stats will leave investors to consider the overnight FOMC meeting minutes and softer inflation figures that reined in bets of a 25-basis point Fed interest rate hike in May.

However, despite the expectation of a mild US recession later this year, the probability of a 25-basis point interest rate hike fell moderately from 72.9% to 65.2% overnight, according to the FedWatchTool.

As the markets respond further to the US CPI Report and overnight FOMC meeting minutes, trade data from China will influence market risk sentiment this morning. Economic data from China has been lackluster since the change in zero-policy COVID. Disappointing trade data would weigh on riskier assets.

USD/JPY Price Action

This morning, the USD/JPY was down 0.01% to 133.121. A mixed start to the day saw the USD/JPY fall to an early low of 133.039 before rising to a current high of 133.288.

Technical Indicators

The USD/JPY needs to move through the 133.302 pivot to target the First Major Resistance Level (R1) at 133.874 and the Wednesday high of 134.046. A return to 134 would signal a bullish USD/JPY session. However, US wholesale inflation and jobless claims must support a USD/JPY breakout.

In case of an extended rally, the bulls would likely test resistance at 134.5 but fall short of the Second Major Resistance Level (R2) at 134.618. The Third Major Resistance Level (R3) sits at 135.934.

Failure to move through the pivot would leave the First Major Support Level (S1) at 132.558 in play. However, barring another data-fueled sell-off, the USD/JPY pair should avoid sub-132 and the Second Major Support Level (S2) at 132.986. The Third Major Support Level (S3) sits at 130.670.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The USD/JPY sits above the 200-day EMA (132.859). The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bullish signals.

A USD/JPY hold above the 200-day EMA (132.859) would support a breakout from R1 (133.874) to target 134.5. However, a fall through the EMAs and S1 (132.558) would give the bears a run at S2 (131.986). A fall through the 50-day EMA (132.688) would send a bearish signal.

The US Session

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

Following the softer-than-expected US CPI Report, a hotter-than-expected producer price index would test the theory of a Fed rate pause. However, initial jobless claims need to increase modestly to support a hawkish policy outlook.

Investors should also monitor Fed chatter on monetary policy and the US economy.