In May, consumer inflation grew to 0.4%, up from the 0.3% in April, and beating forecasts around 0.2%. The core reading edged up to 0.3% from 0.2%, also beating forecast which was at 0.2%. Strong inflation will be a factor that the FOMC considers for its first rate hike since the financial meltdown. A rate hike will strengthen the USD, so traders are buying up the USD after the release of the hot inflation data today.
USD/JPY has been bearish in June, falling from 102.79 to 101.60. This is part of an overall consolidation between 100.76 and 103. We saw the market respect eh 100.76 low on the year in May, when the market bounced off 100.82. It looked like USD/JPY was poised to challenge that 103 resistance, but retreated in June. Today, strong inflation data for May is helping USD/JPY start to turn bullish again.
The 4H Chart shows the USD/JPY push above the 102.14 resistance as well trade above the moving averages (200,100,50) in the 4H chart. It is about to challenge June’s falling trendlines. A break above 102.40 should expose the 102.79 high and the 103 resistance.
(USD/JPY 4H Chart, 6/17)
In either bullish or bearish scenario, look for resistance at these trendlines. If a subsequent pullback fails to push back below 102, the bullish outlook should develop. Below 102, the focus remains back towards the 101.60, 101.43, and 100.83 pivots.
If price can hold above 102, the 103 would be in sight. Above 103, the 104.12 pivot and the 105.44 high on the year would be in sight.
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