USDJPY has been held at weakened levels ahead of tonight’s report of both the Tokyo and national consumer price index (CPI) data. Market participants are expecting the fastest gain in consumer prices in more than two decades, which could launch the yen higher.
“Much higher numbers may raise expectations the BOJ will revise its inflation forecast and push back the timing of additional stimulus. The CPI data could be a trigger for yen strength,” said Yujiro Goto, senior FX strategist at Nomura International PLC. Analysts are forecasting the Tokyo CPI data to rise from one percent to 2.8 percent, as well as the national CPI to tick higher from 1.3 percent to 1.4 percent.
Yen futures are higher and gaining momentum. The ADX on the 4H chart is beginning to turn higher, while the +/- DMI divergence growing wider. The yen is quite volatile, but a break of the smaller downtrend could cause technical buying. This would send the yen to the 78.6 percent retracement level on the 4H chart, or .009825. A pullback may be in the works, likely dependent upon the German Ifo business climate, ECB President Mario Draghi’s speech, and US data. Support would like at the 20 EMA near .09760.
USDJPY has been stuck between 102.15 and 102.68 and has bounced between the band several times as yen futures increase and decrease in spurts. With traders eyeing the upcoming CPI data, the pair will likely remain range bound consider solid data out of Germany and the US. If data is weak, traders could see the pair trade through the demand zone and test support at 101.80.
If USDJPY can get a reprive, the pair can still trade higher into resistance in the high 102.50s before reaching the range’s supply zone.