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The USDJPY has broken above near-term resistance at 116.396 after positive US inflation data was released on Thursday afternoon. The inflation data has hit a 40-year high as commodity prices soar amid the cloud of war. The Bank of Japan remains neutral on monetary policy in the near term amid deteriorating economic health.
Investors are currently pricing in a 25bps from the Fed next week and the tone may be more hawkish in a bid to curb inflation in the near term. This policy divergence may boost the dollar strength in the near term amid diminishing safe-haven demand. Comments from President Vladimir Putin indicate diplomatic talks may be near a peace truce although no details are clear at the moment.
The weekly chart shows a bullish flag breakout after prices breached a critical resistance at 116.396. Investors may look for higher prices on the current trend as the outlook turns strongly bullish in the near term.
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Upside movement is capped by a 5-year high at 118.773 and a break above that area may open way for further upside towards 125.953 which coincides with 15-year high.
However, a failure to break above 118.773 may cause price retracement towards 116.396, near-term resistance turned support.
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Early Friday morning, the USDJPY broke above critical resistance at 116.396 as bulls reclaim 117.00 for the first time after 5-years. Price is currently trading above a 200-period moving average and the outlook on the pair is currently bullish.
