USD/JPY Eyes Key Support as Inflation Expectations Take Center Stage
The USD/JPY currency pair has been experiencing a dichotomous trend in recent times, with longer-term charts indicating a bearish shift but shorter-term analysis showing continued buying pressure after pullbacks.
Last week saw the pair test resistance at 159, leading to a pullback to support at 156.68, which provided a 100+ pip bounce yesterday.
The weekly chart shows a clear shift in trend over the past five years, with buyers testing and testing as each fresh high prints, while exits bring furious retracements driven by changing expectations of Fed rate hikes or cuts.
The current environment is marked by dual intervention from the U.S. and Japan, which has led to motive for longs, resulting in prices pushing up to 160 in August before a swing down to 153.
With Core PCE data due tomorrow, the focus will be on inflation expectations, with stronger readings leading to higher odds of more US rate hikes, further exposing the deviation between the US and Japan.