The USD/JPY has been bearish this week as we can see in the 1H chart. It fell from a high on the week around 119.75 down to about 118.80 before consolidating. Note the consolidation mid-week, between roughly 118.80 and 119.45. Yesterday price fell below this support and extended to 118.55 before stalling again ahead of the 4/17 US session.
The USD/JPY tested 118.55 again just ahead of US CPI data. According to the Bureau of Labor Statistics, there was a 0.2% inflation in March, which matched the forecast as well as the previous print. After 3 months of negative prints, 2 straight months of positive readings is a good sign that inflation is anchoring back up.
(click to enlarge; source: forexfactory.com)
As we can see in the 1H chart, the initial reaction to this inflation data is positive for the USD, at least in the USD/JPY where we see a rally from 118.56 above 119. Price action is testing a falling wedge resistance and the 50-hour SMA. The RSI is approaching 60 above which it would reflect loss of the prevailing bearish momentum. This relatively strong reaction to the inflation data opens up the 119.47 resistance, but only if can clear some intra-week resistance around 119.15.
Above 119.47, the 119.75 support/resistance pivot is the next key level to break in order to revive the bullish continuation mode. We might still see price stick around 120. If it does, monitor the consolidation around 120, with the favored scenario being a bullish breakout, which would open up the 122 high again.
If price can not break above 119.75, or even 119.47, the pressure will remain on the 118.56 low on the week, with risk of falling further into a multi-month consolidation support area.
The daily chart shows that a break below 118.20 might be needed before opening up the 115.56-116 range support. Otherwise, the market is still neutral-bullish with emphasis on the bullish since the prevailing trend is bullish and price is above the “central pivot” of the multi-month range action.
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