USD/JPY analysis: inflation holds the key this week

Valeria Bednarik FXStreet

USD/JPY Current price: 111.26

The USD/JPY pair closed the week higher at 111.26, although with a third consecutive doji on Friday, as investors struggled to find a driver. Soft US data released on Friday offset early Fed's speakers hawkish stance, while a worse-than-expected manufacturing index in Japan prevented the JPY from appreciating, as the Nikkei Flash Japan PMI fell to a seven-month low of 52.0 in June from 53.1 in May, also missing expectations of 53.4. Japan will release its May inflation data next Thursday, expected modesty higher. Despite the BOJ has said that it plans to maintain its accommodative policy, higher inflation may trigger speculation of retrieving easing sooner than expected. In the meantime, the daily chart shows that the price met selling interest on approaches to the 100 DMA, currently converging with the 50% retracement of the latest daily slide around 112.00, while technical indicators head nowhere, but remain within positive territory. Shorter term, the 4 hours chart presents a neutral-to-bearish stance, with the price stuck around a modestly bearish 200 SMA, and technical indicators heading marginally lower around their mid-lines. A critical support comes at 110.90, the 38.2% retracement of the mentioned rally, with a break below it favoring a bearish extension towards the 110.00 region.

Support levels: 110.90 110.50 110.10

Resistance levels: 111.60 112.00 112.45

View Live Chart for the USD/JPY

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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