Currently, USD/JPY is trading at 113.38, up 0.08% on the day, having posted a daily high at 113.49 and low at 113.26.
USD/JPY offers have capped the bulls in the Tokyo open making for a double top at the aforementioned highs. Stocks overnight were bullish, closing with modest gains, but not positive enough to spill over for a risk-on start to Tokyo this morning with the Nikkei sliding in the open.
The euro is vulnerable to the downside and the cross is keeping a lid on a heavy looking USD/JPY while markets wait for the key US CPI data scheduled for release at the end of the week. “We expect core CPI inflation to accelerate but only moderately to 0.1% (0.129%) m-o-m in June from a 0.063% increase in May after a series of the weaker-than expected readings since March,” explained analysts at Nomura.
Markets are also keeping one eye on US politics and USD/JPY fading could be in play on rallies while the US Senate remains short on healthcare votes. That coupled with a dovish Yellen outcome to her two-day testimony exposes the greenback to the downside and keeps USD/JPY bulls in check. Japanese IP is next on the cards for today’s shift.
Valeria Bednarik, chief analyst at FXStreet explained that the technical picture shows that, after breaking the base of the daily ascendant channel that led price’s action since late June, the pair was not even able to complete a pullback, indicating an increasing downward potential in the pair.
“Shorter term, and according to the 4 hours chart, the price is still holding above its 100 and 200 SMAs, whilst the Momentum indicator heads marginally lower within negative territory, whilst the RSI indicator resumed its slide after correcting oversold conditions, now at 44, favoring a downward extension on a break below the 112.80/90 support area,” noted Bednarik.