USD/JPY Forecast: Selling to gather pace, Head & Shoulders on 1-hour chart

The Dollar-Yen pair recovered from the low of 112.86 on Thursday, tracking the uptick in the treasury yields. The spot closed at 113.29 and extended gains to a high of 113.58 in Asia before trimming gains to trade around 113.45 levels. 

Key Technical Levels

Resistance

113.26 (1-hr 50-MA + session low)
112.86 (H&S neckline support)
112.72 (4-hr 100-MA)
112.32 (38.2% Fib R of 108.80-114.495)

Support

113.57 (5-DMA)
113.97 (23.6% Fib R of June 2016 low - Dec 2016 high)
114.495 (July 11 high)
114.64 (61.8% Fib R of 118.66-108.13)

1-hour chart - head and shoulders

Failure to take out 10-DMA in Asia if followed by a break below 113.26 (1-hr 50-MA + session low) would open doors for 112.86 (neckline support). A break lower would yield a bearish MACD cross and trigger a sell-off in the pair to 112.50 - 112.32 levels. 

On the higher side, only an end of the day close above 10-DMA would shift risk in favor of a re-test of the recent high of 114.49 levels. 

Focus on US inflation data

A better-than-expected CPI would push the USD/JPY spot well above 10-DMA. Meanwhile, a negative CPI print could yield a sell-off in the 10-year treasury yield, thus leading to bigger drop in the USD/JPY pair to 112.32-112.00 levels.