Japanese Yen flirts with two-week low vs USD after CPI report, ahead of BoJ

USD/JPY regains positive traction as the JPY weakens after Japan’s CPI report for August.
Expectations of a more hawkish BoJ might hold back JPY bears from placing fresh bets.
Softer US bond yields undermine the USD and further contribute to capping spot prices.

Haresh Menghani FXStreet

The USD/JPY pair attracts fresh buyers during the Asian session on Friday and currently trades above the 156.00 mark, near a two-week high as traders await the outcome of a two-day Bank of Japan (BoJ) meeting.

The Japanese Yen (JPY) weakens a bit after data released from Japan showed that the headline Consumer Price Index (CPI) held steady at 1.9% YoY, while the core inflation unexpectedly eased to 1.7% in August. Moreover, the core CPI, which excludes both fresh food and energy prices, remained below the central bank's 2% target, tempering expectations of a more hawkish BoJ and providing a modest lift to the USD/JPY pair.

Nevertheless, traders are still pricing in a greater chance of a follow-through up move in December after the widely expected BoJ rate hike this Friday. Hence, BoJ Governor Kazuo Ueda's comments during the post-meeting press conference will be scrutinized regarding the precise timing and pace of future tightening. The outlook, in turn, will play a key role in driving the JPY and provide a fresh impetus to the USD/JPY pair.

Meanwhile, Federal Reserve (Fed) Chair Kevin Warsh’s focus on inflation calmed the recent selloff in the fixed-income market, dragging US bond yields away from multi-year highs. This keeps US Dollar bulls on the back foot, which, in turn, might keep a lid on any further upside for the USD/JPY pair heading into the key central bank event. Spot prices, however, seem poised to register gains for the first time in three weeks.

USD/JPY 4-hour chart

Technical Analysis

The USD/JPY pair maintains a capped tone below the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 50.0% Fibonacci retracement. The cluster of overhead levels suggests rallies are vulnerable to selling interest while the recent bounce off lower levels looks more like consolidation within a broader corrective phase than a decisive bullish continuation.

Meanwhile, initial resistance is seen at the 100-period SMA at 156.44, followed closely by the 50.0% retracement at 156.60, while further barriers align at the 61.8% level at 157.48 and then 158.74 and 160.35. On the downside, immediate support is located at the 38.2% Fibo. retracement at 155.71, ahead of the 23.6% level at 154.62, with a deeper bearish extension pointing toward the structural anchor around 152.85.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Economic Indicator

National CPI ex Food, Energy (YoY)

Japan’s National Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households nationwide. The YoY reading compares prices in the reference month to the same month a year earlier. The gauge excluding food and energy is widely used to measure underlying inflation trends as these two components are more volatile. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

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