USD/JPY Stabilizes as Steady US Inflation Data Bolsters Dollar

The USD/JPY pair remained relatively flat near the 159.20 level on Friday. The US Dollar continues to find support following the release of fresh inflation figures, while the Japanese Yen remains under pressure due to persistent ambiguity regarding the Bank of Japan’s (BoJ) future policy trajectory.

The most recent Core Personal Consumption Expenditures (PCE) Price Index remained unchanged at 3.3% year-over-year for April. This stability reinforces concerns that inflation is remaining sticky, fueling market expectations that the Federal Reserve may keep interest rates restrictive for a longer duration.

Simultaneously, the Yen is being weighed down by domestic economic indicators. Tokyo’s Core Consumer Price Index (CPI) slowed to 1.4% year-over-year in May, marking the fourth straight month below the BoJ’s 2% target. Conversely, factory output saw an unexpected recovery in April.

Market caution has further increased following comments from BoJ Governor Kazuo Ueda, who warned that temporary energy price shocks could become chronic if they begin to impact wage growth and overall inflation expectations.

Short-term technical analysis:

On the 4-hour chart, USD/JPY is trading at 159.24, maintaining a neutral position as it oscillates between nearby support and layered overhead resistance. The pair is currently trading above the 100-period Simple Moving Average (SMA) at 158.48, which supports the overarching uptrend. However, it remains limited by the 20-period SMA at 159.36, which aligns with a horizontal resistance zone. The Relative Strength Index (RSI) is hovering around 49, indicating balanced momentum following a period of consolidation.

To the upside, immediate resistance is noted at 159.25, with a stronger confluence of resistance at 159.36 where the 20-period SMA and horizontal levels meet; bulls must break above this cap to regain upward momentum. On the downside, initial support is found at 159.20 and 159.10, while the 100-period SMA at 158.48 serves as a primary floor. A decisive drop below this moving average could trigger a more significant corrective decline.

Source link