USD/JPY Price Analysis: Declines towards 140.00 ahead of US core PCE Inflation data

The USD/JPY pair consolidates in a tight range near 142.00 after a sharp correction ahead of the United States core Personal Consumption Expenditure (PCE) price index data for November, which will be published at 13:30 GMT.

The core PCE inflation report is expected to remain soft as the Federal Reserve (Fed) has been keeping interest rates unchanged in the range of 5.25-5.50%. The downside in the major would continue if the underlying inflation turns out softer-than-anticipated. Meanwhile, deepening rate cut expectations from the Federal Reserve (Fed) have weighed heavily on the US Dollar Index (DXY). The USD Index has refreshed its four-month low around 101.55.

On the Tokyo front, Japan’s National Consumer Price Index (CPI) has remained above the 2% target for the 20^th time in a row.  The Bank of Japan (BoJ) is expected to continue its ultra-dovish policy stance till wage growth in the Japanese economy gets high enough to keep inflation comfortably above 2%.

USD/JPY is consistently declining from more than one month. The downside momentum accelerated after a bearish crossover from the 20 and 50-day Exponential Moving Averages (EMA), which happened around 148.80. The asset is expected to decline further towards the upward-sloping trendline plotted from January 16 low at 127.22.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-40.000, pointing to continuation of a downside momentum.

Fresh downside would appear if the asset drops below December 14 low near 141.00. This would drag it towards the upward-sloping trendline near 139.40, followed by July 28 low near 138.00.

In an alternate scenario, a recovery move above December 19 high near 145.00 would drive the asset towards December 11 high around 146.60, followed by December 6 high near 148.00.

USD/JPY daily chart