- USD/JPY bears are in the market and eye a downside continuation.
- The trendline support is vulnerable at this juncture.
USD/JPY is flat on the session so far as Tokyo traders come in on Friday with the price submerged below a key resistance area near 132.70 on the 4-hour charts. The US Dollar is under pressure due to data this week that has led markets to believe that the Federal Reserve will indeed pause in its tightening policy campaign after one last rate hike in May.
The main focus was on the Consumer Price Index (CPI) inflation data on Wednesday came in at 5% year-on-year in March, down from 6% in February. Then, on Thursday the easing inflationary pressures continue in data with the Producer Price Index (PPI) for final demand dropping 0.5% last month. In the 12 months through March, the PPI increased 2.7% which was the smallest year-on-year rise since January 2021 and followed a 4.9% advance in February.
to top it all off, the number of Americans filing new claims for unemployment benefits increased more than expected last week. Consequently, Fed funds futures traders are now pricing for the Fed's benchmark rate to peak at 5.002% in June, from 4.830% now, before falling back to 4.278% in December.
Meanwhile, as for the position, which will be updated later on Friday, JPY net short positions increased in the prior weeks, having fallen from the previous week to the last. Analysts at Rabobank anticipate that they remain well above the levels held earlier in the year ´´as speculators have lost faith in the view that the BoJ may soon announce a less accommodative monetary policy.´´
USD/JPY technical analysis
USD/JPY Price Analysis: Bulls depend on a lifeline at daily trendline support
The bulls now need to get above the right shoulder of the head and shoulders on the 4-hour chart or face a blow-off to the downside and a break of the trendline support as per the head and shoulders on the 4-hour chart.
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